So my employer's 401(k) plan is changing administrators and changing fund offerings. This is good, in my opinion, as many of the new offerings are Vanguard funds. But since several of the funds I'm currently shoveling money into will be liquidated with any existing assets re-mapped to new funds, I've got to put a little thought into the new offerings before my next paycheck at the end of the month.
I am feeling crunched for time with work (we haven't even fully unpacked from the trip yet!) so I suspect I'll swap everything into the new Vanguard target fund option. But to make sure I'm not committing some gross retirement foul, bear with me while I talk this through a little. About half my money is in a Roth 401(k) and the other half is in a traditional pre-tax 401(k), since the Roth option wasn't available for the first fifteen months after I became eligible to participate. But the changes I make will apply to both types of funds, so I am going to ignore the tax status of the money, and talk about them all as part of one big pot.
So I am invested in five funds:
- a large cap growth fund (8.2% of my total 401(k) portfolio)
- a large cap blend fund (18.8%)
- small cap blend fund (27.1%)
- a second large cap blend fund (10.5%)
- a developed-markets international fund (35.5%)
All but the international fund will be liquidated and rolled over, though I have the option of swapping out the international fund, too, as part of a larger rebalancing.
The fund I'm eyeing up is the Vanguard Target 2045 fund, the latest target date my employer is offering. That fund breaks down like this:
- 71.7% total stock index fund
- 10.5% European stock index
- 10.0% bond fund
- 4.6% Pacific stock index fund
- 3.2% emerging markets index fund
I don't love the 10% in bonds, but honestly, the 18.3% in international funds is probably closer to where I ought to be for my personal comfort level, and the total stock fund means I don't have to think very hard about what sectors to invest in. Expense ratio of 0.19%.
So astute readers, any cautions for me? Pleas of sanity? Golden accolades? I'm about the pull the trigger.
3.11.2008
New Retirement Plan Options
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2 comments:
Impressive diversification. I think Vanguard target funds are a good indexing approach that minimize fees and will provide superior long term performance. Scott Burns has a lot of good articles about this at www.scottburns.com
Is the expense ratio there just the target fund expense ratio, or is that the total, including the expense ratios for the underlying funds as well? My employer's target fund was less than transparant about that. But Vanguard funds are cheap, so maybe that is the total cost.
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