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My (rather large) company is moving from Vanguard Brokerage with actual Vanguard funds to our parent-company managed "savings plan" with broadly managed funds of funds through Merrill Lynch. Can someone explain this language to me? quote:Although called a "Fund," this investment option is not a mutual fund, but is a separately managed account that does not constitute a registered investment company. Only plan participants can purchase units of this "Fund," which is not publicly traded and is not listed on exchanges. Listed expense ratios are very low. (.02-.05% for the index funds.) Is this a typical setup? My suspicious nature has me worried. Are there compounded expense ratios as this is a fund that holds other funds or are we just getting some sort of institutional rates?
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Nov 13, 2013 01:18
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I apologize if this has been asked/answered before (if that's the case, I'd appreciate it if someone could point me towards it). I recently left an old job and started a new one. At my old job (IT in a public school) I had a 403b set up. Since I left that field, I no longer have the option to contribute to that fund. There's only about ~$6000 in there, but I'd like to move that money to a different type of fund. Has anyone ever done this before? My new employer offers 401k matching, but I'd like to maybe switch the 403b money to an IRA (Roth perhaps?). Any advice, or just pointing me in the right direction, would be greatly appreciated.
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Nov 13, 2013 20:39
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ukrainius maximus posted:I apologize if this has been asked/answered before (if that's the case, I'd appreciate it if someone could point me towards it). I recently left an old job and started a new one. At my old job (IT in a public school) I had a 403b set up. Since I left that field, I no longer have the option to contribute to that fund. Pretty much anytime the concept of rolling over pops up, the general consensus seems to be roll into a Roth IRA opened at Vanguard. At least with respects to closing out old employer 401ks, I'm not sure if things are different for a 403b though.
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Nov 13, 2013 20:50
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Thanks, I had wanted to go with Roth IRA since a close older colleague always suggested doing that. I'm going to have to talk with my 403b group to see what my options are, I probably should have done that already.
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Nov 13, 2013 21:03
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ukrainius maximus posted:Thanks, I had wanted to go with Roth IRA since a close older colleague always suggested doing that. I'm going to have to talk with my 403b group to see what my options are, I probably should have done that already. Rolling over to a traditional IRA is generally the default choice. It should only be after you evaluate your tax situation for the year that you should consider going directly to Roth. And you can convert from the traditional to Roth a little bit at a time (like $1k per year for example). I have done a 403b rollover and had to coordinate between the existing custodian and Vanguard. It was one of the few transfers I have done that required some paperwork.
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Nov 13, 2013 21:20
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When you say evaluate my tax situation, what does that mean exactly? I'm assuming it means I'm going to have to pay taxes on whatever I rollover into the Roth IRA so it would probably be a bad idea to do it all at once, does that sound right?
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Nov 13, 2013 21:48
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ukrainius maximus posted:When you say evaluate my tax situation, what does that mean exactly? I'm assuming it means I'm going to have to pay taxes on whatever I rollover into the Roth IRA so it would probably be a bad idea to do it all at once, does that sound right? If you anticpate your income will be very stable, the only question really is how much can you afford to convert at one time. Generally speaking, people like to pay the taxes for conversion out of their pocket (rather than from the IRA) so that they do not lose effective contributions. Depending on the amount you wish to convert, this could be a sizeable lump-sum payment. If it is a large amount, you will likely want to wait until the end of the year, find out what your taxable income would be without the conversion, and then convert an amount low enough that it does not go over into a higher tax bracket. Repeat this process each year until you convert the remainder. If you expect to have any changes in income, that might change how you want to time the conversion to effect how much you pay in taxes. For instance, if you anticipate changings jobs to a higher-paying job next year that would put you into a higher tax bracket, it might not be a bad idea to convert a large portion of the traditional IRA to Roth if you have the funds on-hand to pay the taxes this year, at least up to the point that you hit the ceiling of your current tax bracket. Alternatively, if you anticpate you will have significantly less income next year (let's say you are going back to school full-time or something), it would probably be wiser to wait until next year to convert so that the taxes would be calculated on a much lower income and therefore tax bracket.
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Nov 13, 2013 22:13
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Thanks for that. It seems like you may be talking about converting from traditional IRA to Roth IRA though. Would this still essentially be the same if I'm going from 403b to Roth IRA?
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Nov 13, 2013 22:30
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ukrainius maximus posted:Thanks for that. It seems like you may be talking about converting from traditional IRA to Roth IRA though. Would this still essentially be the same if I'm going from 403b to Roth IRA? As 80k said, you will want to go from 403b-> Traditional IRA first. That way there is no taxable event. Then you can convert whichever amounts you want to Roth at your leisure. Once you get the assets into a traditional IRA, the conversion part of it is as simple as a few clicks in your account to move the funds into a Roth.
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Nov 13, 2013 23:23
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You guys are awesome, I really appreciate the help.
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Nov 13, 2013 23:26
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Any federal employees can recommend what fund to be in for the TSP? I was thinking of putting it all in a target retirement year fund. Thoughts?
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Nov 15, 2013 01:10
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FlyWhiteBoy posted:Any federal employees can recommend what fund to be in for the TSP? I was thinking of putting it all in a target retirement year fund. Thoughts? Is that going to be the only investment vehicle you have? If you have outside investments (even other retirement accounts, such as a Roth), then it might be beneficial to consider going heavy into the G-fund to replace bond holdings elsewhere and then rebalance everything else accordingly. The G-Fund is an incredibly good thing to have access to in that it functions like a medium-term government bond fund but can never lose value (like a money market fund with a much higher-than-market interest rate).
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Nov 15, 2013 02:18
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flowinprose posted:Is that going to be the only investment vehicle you have? If you have outside investments (even other retirement accounts, such as a Roth), then it might be beneficial to consider going heavy into the G-fund to replace bond holdings elsewhere and then rebalance everything else accordingly. The G-Fund is an incredibly good thing to have access to in that it functions like a medium-term government bond fund but can never lose value (like a money market fund with a much higher-than-market interest rate). The rest of my investments are in a vanguard target retirement fund. I'll have to look into the G-fund a little more, seems interesting.
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Nov 15, 2013 02:33
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The G fund may only be more useful as you get older. In general, if you're under 30, then going predominantly stocks is usually the best idea for retirement funds. The good news is that TSP is a very well built plan. Basically, across all of your accounts, you should determine an asset allocation (which is most correlated to your age, but also has to do with some planning) between stocks and bonds. Within stocks, approximately 30% should be international (in the I fund). The rest of the stock composition should be split at an approximately 80/20% ratio between C and S. The rest (bonds) are basically split between G and F, with about 33% into G and 67% into F. This allocation sort of matches TSP lifecycle funds, except they bias towards midcap/smallcap stocks: https://www.tsp.gov/investmentfunds/lfundsheet/fundPerformance_L2050.shtml
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Nov 15, 2013 03:32
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Woot, after putting pressure on my employer/Fidelity we're going to get access to some low-ER (<0.1%) index funds sometime early next year. Might have to look into actually maxing out my 401k contribution when those hit, I'm only doing about 12-13k/yr now (+ max IRA, max HSA). I still hate Fidelity with the fire of a thousand suns, but at least I won't be getting rear end reamed by ERs in the 0.6-1.0% range anymore.
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Nov 15, 2013 04:00
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Well played. Although I will say Fidelity has the second-best options with my employer - I'd've gone with them if Vanguard wasn't available.
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Nov 15, 2013 04:24
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Guinness posted:Woot, after putting pressure on my employer/Fidelity we're going to get access to some low-ER (<0.1%) index funds sometime early next year. Might have to look into actually maxing out my 401k contribution when those hit, I'm only doing about 12-13k/yr now (+ max IRA, max HSA). Congrats. Out of curiosity, how big is your employer? We sometimes get questions in this thread from people about how to go about getting changes made like you did. I would think it would be more feasible to accomplish changes like this in a rather small business.
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Nov 15, 2013 05:15
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flowinprose posted:Congrats. Out of curiosity, how big is your employer? We sometimes get questions in this thread from people about how to go about getting changes made like you did. I would think it would be more feasible to accomplish changes like this in a rather small business. Also curious about this. I've been harrasing our HR/Fiscal folks on & off for a while now about our 457b. Unfortunately the County I work for has approx 6k employees, (the agency I'm with has almost a third of those), and each major agency has a representative that sits on a deferred comp planning board. They are supposed to meet quarterly, and provide recommendations to our budget office and the commissioners court as needed. It took several years for the 'powers that be' to finally ditch Nationwide and transfer our accounts over to Great-West for management a few years back, but our options are still mediocre imo. I've been trying to get us a wider selection of low ER options, a Roth option, etc, but the wheels of bureaucracy tend to never move. (And of course moving to another management company would consist of sending out requests for bids and another act of god to make them change yet again). Sucks being the little guy at times, but perhaps if I continue to poke them with sticks something will eventually happen.
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Nov 15, 2013 16:15
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flowinprose posted:Congrats. Out of curiosity, how big is your employer? We sometimes get questions in this thread from people about how to go about getting changes made like you did. I would think it would be more feasible to accomplish changes like this in a rather small business. We're a small consulting company of about 60-65 people. I imagine these types of things are much easier to accomplish in a small company where you're on a first name basis with everyone including the President & HR director. Several of us employees had brought up the idea of a 401k review in the past and recently we formed a small committee of interested people to go through our plan and decide if the old fund choices were working for us. Fortunately a few people actually know their rear end from their elbow when it comes to finance and investing, because our Fidelity rep pushed back A LOT on us asking for access to cheap index funds, presumably because they don't get a big commission or something on them. They had a whole spiel about why you should let Fidelity actively manage your money and use their expensive target-date and sector funds and blah blah blah. To someone who doesn't have a very good understanding of 401ks and investing I can see how one could fall into their trap (and I bet is what happened originally and why our fund choices suck(ed) so bad). A couple of us raised the question of why stick with Fidelity at all, but that was mostly a non-starter. But hey, at least we're going to get some cheap index funds through Fidelity so I consider that a big victory. I did learn that apparently Fidelity is one of the cheapest places for an employer to offer a 401k plan through, and that's how they get so many companies to use them. But then they make their money by selling you really hard on expensive funds and don't like to talk about low-ER index funds. Edit: One of the most surprising things in this process is that it got people talking about 401ks, saving, and investing, and it was actually kind of shocking how many of my coworkers are pretty ignorant about all of it. Everyone I work with is incredibly smart and talented, most make over six-figure incomes, and the average age is probably about 40 but their eyes kind of glaze over when it comes to investing and saving. It's not particularly complicated stuff, but people just don't seem to want to think about it. Guinness fucked around with this message at 19:02 on Nov 15, 2013 |
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Nov 15, 2013 18:52
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For people in small companies that have some influence over 401(k) providers, there are a few no-nonsense options, like Employee Fiduciary and TheOnline401k. You can choose Vanguard funds as the main choice of funds, and the total administrative costs should be lower than going with Fidelity or Vanguard as the plan provider, especially for small companies. In fact, many small companies have tried to set up a low-cost plan through Vanguard, and even Vanguard themselves tell them to go to these lower-cost outfits for access to their funds, since Vanguard is unable to offer low total administrative costs for small companies if you do business with them directly. I have, however, set up a SIMPLE IRA plan with Vanguard for a small company, and it is very cheap and very easy-to-set-up. So that is another possible option for retirement plans.
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Nov 15, 2013 19:41
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I'm looking at adding some bonds to my portfolio. I graduate college in the spring and will start a pretty solid job so I can assume a lot of risk. I'm 100% equities right now with a good mix of low expense ratio etfs. I've hedged myself solidly with a mix of small/medium/large cap funds, emerging markets, and foreign etfs. Academically I realize that adding a small amount of bonds will reduce the riskiness of my portfolio significantly. However, with interest rates so low and an inevitable rise in rates I have trouble buying into debt right now. Once the fed relaxes its monetary policy and rates increase prices will inevitably decline. Some people have told me to look at emerging market debt and junk bonds, but I'm not really interested in that. What is intriguing is some new ETFs they've built designed to be inversely correlated to a major bond index through the use of derivatives (when rates rise the fund goes up). This makes a lot of sense to me but I'm not that familiar with these types of investments. Finally, by investing in them it seems that I'd be completely defeating the purpose of investing in bonds to begin with (inverse correlation to equities). Does anyone have any thoughts? I know the tried and true formula for long-term success and plan on picking up bonds in the future, but I'm hesitant now.
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Nov 16, 2013 03:34
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Ignoranceisbliss88 posted:I'm looking at adding some bonds to my portfolio. I graduate college in the spring and will start a pretty solid job so I can assume a lot of risk. I'm 100% equities right now with a good mix of low expense ratio etfs. I've hedged myself solidly with a mix of small/medium/large cap funds, emerging markets, and foreign etfs. Assuming you are going index funds, 100% into stocks is not really that bad for your age. In general, 10% in bonds, 90% in stocks is recommended, but you can take a bet that stocks will do well in the short term, and nobody will really call you out for it. Just keep in mind that you eventually will want to start putting money into bonds.
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Nov 16, 2013 09:21
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Ignoranceisbliss88 posted:I'm looking at adding some bonds to my portfolio. I graduate college in the spring and will start a pretty solid job so I can assume a lot of risk. I'm 100% equities right now with a good mix of low expense ratio etfs. I've hedged myself solidly with a mix of small/medium/large cap funds, emerging markets, and foreign etfs. Academically I realize that adding a small amount of bonds will reduce the riskiness of my portfolio significantly. However, with interest rates so low and an inevitable rise in rates I have trouble buying into debt right now. Once the fed relaxes its monetary policy and rates increase prices will inevitably decline. Some people have told me to look at emerging market debt and junk bonds, but I'm not really interested in that. What is intriguing is some new ETFs they've built designed to be inversely correlated to a major bond index through the use of derivatives (when rates rise the fund goes up). This makes a lot of sense to me but I'm not that familiar with these types of investments. Finally, by investing in them it seems that I'd be completely defeating the purpose of investing in bonds to begin with (inverse correlation to equities). Does anyone have any thoughts? I know the tried and true formula for long-term success and plan on picking up bonds in the future, but I'm hesitant now. Read the part in the Four Pillars about the statistical chance of a large market correction. How many of them you'll probably see in your professional life. This will help you understand why you want bonds.
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Nov 16, 2013 09:49
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Tony Montana posted:Read the part in the Four Pillars about the statistical chance of a large market correction. How many of them you'll probably see in your professional life. This will help you understand why you want bonds. I understand the importance of fixed income and their significant reduction in the standard deviation of a portfolio. If we weren't in such a historically terrible period for fixed income investments I'd add 10% or so to my portfolio....but we are in such a period. I want to take advantage of this abnormal period right now with every intention of following the traditional asset allocation theory of bonds after their prices drop.
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Nov 16, 2013 21:23
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Does Four Pillars have a part about timing the market vs time IN the market?
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Nov 16, 2013 21:54
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If you want to forgo the insurance of a section of your portfolio in the safer, lower risk equity of bonds.. it's entirely your call. I can actually get savings accounts interest rates from banks at the moment that beats bonds returns, so I've got my safety net in cash. From what I understand the point is if there is a correction, I've then got a wad of cash (or bonds which haven't dived with the stock market) to buy stocks 'on sale'.
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Nov 16, 2013 22:21
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Tony Montana posted:If you want to forgo the insurance of a section of your portfolio in the safer, lower risk equity of bonds.. it's entirely your call. I can actually get savings accounts interest rates from banks at the moment that beats bonds returns, so I've got my safety net in cash. From what I understand the point is if there is a correction, I've then got a wad of cash (or bonds which haven't dived with the stock market) to buy stocks 'on sale'. Yeah, I've actually pretty much done this as well. I was just looking to see if there were any other opinions or opportunities I may have been missing. While I think timing the market by selling or buying your entire portfolio or large junks of it at once is stupid, I think when making new investments it's important to look for depressed sectors.
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Nov 16, 2013 23:30
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Tony Montana posted:If you want to forgo the insurance of a section of your portfolio in the safer, lower risk equity of bonds.. it's entirely your call. I can actually get savings accounts interest rates from banks at the moment that beats bonds returns, so I've got my safety net in cash. From what I understand the point is if there is a correction, I've then got a wad of cash (or bonds which haven't dived with the stock market) to buy stocks 'on sale'. The problem with this thinking is in 2008 the bond funds all cratered 30-40% as well.
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Nov 17, 2013 03:44
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Harry posted:The problem with this thinking is in 2008 the bond funds all cratered 30-40% as well. Total B.S. In 2008: Only one of Vanguard's bond funds lost around 20%. None lost 30-40%. And all treasuries did really well.... 15% for intermediate duration and 23% for longterm treasuries. I remember because I had a ton of treasuries and used them to rebalance into stocks throughout the downturn, experiencing the best benefit to having bonds that an investor is likely to experience in his investing career. Lots of bond funds that loaded up on junk did horrible (losing 30-40%), but none of these were normal Vanguard bond funds that anyone ever recommends and a far cry from your "all bond funds cratered 30-40%" comment.
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Nov 17, 2013 03:56
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After finishing the Four Pillars, it seemed that the main idea is, if you're young (I'm 26, so fairly young) pray for bear markets so you can get cheap stocks. Problem is, this is about the bullish market I can imagine right now (tech IPO's almost doubling on day one...we've seen this before!). Should I just hold my money in liquid savings/CDs and wait for the inevitable fall to snatch up cheap stocks, or is this tantamount to "timing the market" which is always a bad idea?
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Nov 17, 2013 23:39
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Low-Pass Filter posted:After finishing the Four Pillars, it seemed that the main idea is, if you're young (I'm 26, so fairly young) pray for bear markets so you can get cheap stocks. Problem is, this is about the bullish market I can imagine right now (tech IPO's almost doubling on day one...we've seen this before!). Should I just hold my money in liquid savings/CDs and wait for the inevitable fall to snatch up cheap stocks, or is this tantamount to "timing the market" which is always a bad idea? Sounds like you're trying to time the market.
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Nov 17, 2013 23:50
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Yes, you are trying to time the market. Choose an allocation (you are young, so 80-90% stocks and 10-20% bonds, maybe?). Buy that. Forget about bull and bear crap forever.
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Nov 18, 2013 04:14
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Where are bonds going? If held to maturity, a 2% real return on a diversified direct bond portfolio would be very optimistic. Is this the same reality that the historical relation of diversifying into bonds for stability without harm to returns is working in? Clinging to financial advice about big picture investments is no better in the very big picture than following penny stocks is for medium term investments. Tulips make sense until they don't, and the standard rallying cry of "past performance does not guarantee future returns" cuts in every way possible. Timing the market doesn't always mean you're day trading on the S&P, but rather you have some awareness of your assumptions and the ramifications and likelihood of the consequences that will happen if you're wrong. For my money, if you want fixed income it's all about consumer credit instrument (P2P lending) and private equity. Only fools or those who capital appreciation is no longer a primary concern would look seriously at government or corp bonds.
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Nov 18, 2013 05:02
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Just don't be like my mother who moved half her portfolio to a money market account for 2 weeks in case the markets corrected while she was out of the country visiting her family.
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Nov 18, 2013 06:46
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Regarding expense ratios. Most funds I'm looking at have three different numbers, which one should i be paying attention to: Annual Report Expense Ratio (net): 0.19% Prospectus Net Expense Ratio: 0.84% Prospectus Gross Expense Ratio: 0.94% GWPAX is the fund
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Nov 18, 2013 18:14
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Any tips for a 401k rollover? My company just switched owners and now we had to sign up and enroll in new plans. I have 5 years worth of contributions (some Roth, mostly pre-tax) in the account. One caveat is that within the account, we were able to invest in stock purchases of the company. Oh, and I'm 27. I've done some research and talked to a rep from Fidelity, and it seems like the prevailing advice is to roll these funds into an IRA, instead of dollar-for-dollar into my new 401k account. Also, can anybody offer any advice about making Roth contributions to a 401k? I just opened a Roth IRA and if I'm contributing to that, should I just leave my 401k to be predominantly pre-tax? Thanks in advance.
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Nov 18, 2013 18:21
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bathhouse posted:Regarding expense ratios. Most funds I'm looking at have three different numbers, which one should i be paying attention to: http://www.morningstar.com/InvGlossary/expense_ratio.aspx But don't get so interested in ER that you forget to take note of the upfront and deferred sales charges. Your earlier post is right, GWPAX is expensive. Are you paying the 5.75% sales charge? Because holy poo poo, talk about buying some other dude a BMW. You can get foreign and small cap exposure much cheaper. Also, what reason is there to think that the American Funds management is any good? The "long time family friend" thing is how I lost a bunch of money I didn't need to lose in the dot com bubble. My former family friend can kiss my rear end.
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Nov 18, 2013 20:41
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Thanks, trying to figure out how much he screwed me. Looks like i paid the sales charge as well.
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Nov 18, 2013 22:47
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baquerd posted:Where are bonds going? If held to maturity, a 2% real return on a diversified direct bond portfolio would be very optimistic. Is this the same reality that the historical relation of diversifying into bonds for stability without harm to returns is working in? Clinging to financial advice about big picture investments is no better in the very big picture than following penny stocks is for medium term investments. This is generally what I was getting at when asking my first question. I think people cling a little to tightly to the 20% bond/30% domestic large cap/20% small cap etc. etc. It's obviously a valuable proven formula, but a few key tactical decisions with the larger strategic truths kept in mind can be more lucrative. If you're entering the market now it might be wise to shift away from bonds and certain U.S. industries towards Europe and emerging markets and then rebalance when valuations change. (I'm not advocating going all in Europe/EE, but a little heavier allocation in that direction may be wise).
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Nov 19, 2013 00:07
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During bull markets favoring one sector it's always tempting to load your portfolio in that direction. It's also not a good idea. You guys are ignoring the risk component that helps to determine portfolio distribution.
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Nov 19, 2013 00:28
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