Where to invest $10,000 for Retirement - Please Advise

[G-Man]

Quote:

Originally Posted by Animorph Give us the expense ratios of the 401k funds, and the management company of each if available. All Vanguard? If you were able to NUA within a year or so it would be tempting. 7 to 10 years from now is tempting fate. If you have no need/desire to gamble with your retirement, diversify out of the company stock. I had to do the same thing, although in a taxable brokerage account. One thing you can do is look for days when your stock is historically high against your other options, sell some of the stock and buy the fund. I did that to buy other stocks, selling high and buying low. It gave me a relatively quick 15% gain over sticking with my company stock. I doubt it will be as fun transferring into generic funds, but there will still be times when, hopefully, your stock is riding high. I'd take it down to the 30% to 10% level, depending on how excited you are about the stock, how lucrative the NUA looks, and how critical the funds are to your successful retirement. 10% is normally recommended, but then I like 100% equities in retirement and you've made it this far with much more.

I will post the expense ratios and management company of the investment options once I gather all the information. It should be tomorrow....

[G-Man]

Also I wanted to mention that I will be drawing a pension from the company as well. The earliest I can start is age 60th.

[G-Man]

Quote:

Originally Posted by Animorph Give us the expense ratios of the 401k funds, and the management company of each if available. All Vanguard? If you were able to NUA within a year or so it would be tempting. 7 to 10 years from now is tempting fate. If you have no need/desire to gamble with your retirement, diversify out of the company stock. I had to do the same thing, although in a taxable brokerage account. One thing you can do is look for days when your stock is historically high against your other options, sell some of the stock and buy the fund. I did that to buy other stocks, selling high and buying low. It gave me a relatively quick 15% gain over sticking with my company stock. I doubt it will be as fun transferring into generic funds, but there will still be times when, hopefully, your stock is riding high. I'd take it down to the 30% to 10% level, depending on how excited you are about the stock, how lucrative the NUA looks, and how critical the funds are to your successful retirement. 10% is normally recommended, but then I like 100% equities in retirement and you've made it this far with much more.

Please see attachment for information requested....

[Animorph]

Quote:

Originally Posted by G-Man Please see attachment for information requested....

Without looking them up, those funds look like some reasonable choices with mostly low expense ratios and a little bit of diversity. You should compare the index funds' performance with the comparable Vanguard fund or index to see if they're hitting the index fairly closely. Pick some percentages of US, international, and maybe small cap (30%, 20%, 20% and 30% company stock, or 30/30/30/10?) and start moving out of company stock. Add some bonds if you want to go a bit more conservative.

[G-Man]

Anymore feedback?

[G-Man]

Any comments on the following Vanguard funds listed below. These are choices available in my retirement plan.

VHCAX - Vanguard Capital Opportunity Fund - Admiral Shares
VPMAX - Vanguard Primecap Fund - Admiral Shares
VBMPX - Vanguard Total Bond Market Index Fund - Institutional Shares

I will post more information on the index funds in the upcoming days.

Thanks

[growing_older]

What about any index funds from any other provider? Are there any low cost funds in the options available?

[pb4uski]

Quote:

Originally Posted by G-Man Anymore feedback?

See post #19.

The equity index and international funds have relatively low ERs and would seem to be good choices if they do track their indices closely.

Is the interest income fund a stable value fund? If so, and if it pays a decent rate of interest it would be my choice as it would not have any interest rate risk.

[G-Man]

Quote:

Originally Posted by pb4uski See post #19. The equity index and international funds have relatively low ERs and would seem to be good choices if they do track their indices closely. Is the interest income fund a stable value fund? If so, and if it pays a decent rate of interest it would be my choice as it would not have any interest rate risk.

You are correct about the Interest Income Fund. It is a stable share value fund. The annualized performance over the last 10 years are as follows:

1 yr - 2.95%
3 yrs - 3.12%
5 yrs - 3.35%
10 yrs - 4.04%

This fund is benchmarked against the iMoneyNet First Tier Retail Money Fund Index and has outperformed it.

I will post the annualized performance of the equity funds and company stock in another post.

[G-Man]

Quote:

Originally Posted by G-Man You are correct about the Interest Income Fund. It is a stable share value fund. The annualized performance over the last 10 years are as follows: 1 yr - 2.95% 3 yrs - 3.12% 5 yrs - 3.35% 10 yrs - 4.04% This fund is benchmarked against the iMoneyNet First Tier Retail Money Fund Index and has outperformed it. I will post the annualized performance of the equity funds and company stock in another post.

Below is the information for the company stock and equity funds:

Company Stock
1 yr - 6.68%
3 yrs - 27.35%
5 yrs - 18.39%
10 yrs - 19.08%

US Large Cap Equity Fund
1 yr - 20.57%
3 yrs - 18.43%
5 yrs - 7.01%
10 yrs - 7.31%

Fund is benchmarked against the S&P 500 stock index and the performance is roughly the same.

US Mid/Small Cap Equity Fund
1 yr - 25.30%
3 yrs - 19.27%
5 yrs - 8.66%
10 yrs - no data

Fund is benchmarked against the Russell Small Cap Completeness Index and the performance is roughly the same.

International Equity Fund
1 yr - 17.65%
3 yrs - 6.64%
5 yrs - 0.50%
10 yrs - 7.67%

Fund is benchmarked against the MSCI AC Wld ex-US and Foreign Large Fund and the performance is roughly the same.

Are these better choices than the Vanguards funds?

[pb4uski]

Quote:

Originally Posted by G-Man ....Are these better choices than the Vanguards funds?

I'm not sure it really matters as those are the choices you have.

Even if Vanguard were better (I'll let you do your own research), so what?

In any event it would be better than concentrated in a single company stock.

[G-Man]

Quote:

Originally Posted by pb4uski I'm not sure it really matters as those are the choices you have. Even if Vanguard were better (I'll let you do your own research), so what? In any event it would be better than concentrated in a single company stock.

There seem to be some overlap with the Equity Funds and the Vanguard Funds.

For example, the US Large Cap Equity Fund is very similar to the Vanguard PRIMECAP Fund (VPMAX). The Vanguard Fund has a higher Expense Ratio (0.36% vs 0.02%) but a better 1, 3, 5, and 10 Annualized Performance (27.61% vs 20.57%, 18.99% vs 18.43%, 7.28% vs 7.01%, 10.21% vs 7.31%)

The US Mid/Small Cap Equity Fund is very similar to the Vanguard Capital Opportunity Fund (VHCAX). The Vanguard Fund has a higher Expense Ratio (0.41% vs 0.045%) but a similar 1, 3, 5, and 10 Annualized Performance (34.07% vs 25.30%, 19.04% vs 19.27%, 7.95% vs 8.66%, 11.21% vs N/A).

The Interest Income Fund is very similar to the Vanguard Total Bond Market Index Fund. The Vanguard Fund has a lower Expense Ratio (0.05% vs 0.314%) and a lower 1, 3, 5, and 10 Annualized Performance (-0.81% vs 2.95%, 3.45% vs 3.12%, N/A vs 3.35%, N/A vs 4.04%).

[G-Man]

I also want to learn more about Tax-Efficient Fund Placement while I rebalance my retirement portfolio.

[ER Eddie]

Quote:

Originally Posted by G-Man I also want to learn more about Tax-Efficient Fund Placement while I rebalance my retirement portfolio.

Here's something on that, which was recommended to me earlier, and which I still haven't gotten around to digesting.

Principles of Tax-Efficient Fund Placement - Bogleheads

[G-Man]

Quote:

Originally Posted by ER Eddie Here's something on that, which was recommended to me earlier, and which I still haven't gotten around to digesting. Principles of Tax-Efficient Fund Placement - Bogleheads

I assume that all of the dollars in my 401K plan is considered tax deferred dollars. Please confirm?

[G-Man]

Quote:

Originally Posted by G-Man Below is the information for the company stock and equity funds: Company Stock 1 yr - 6.68% 3 yrs - 27.35% 5 yrs - 18.39% 10 yrs - 19.08% US Large Cap Equity Fund 1 yr - 20.57% 3 yrs - 18.43% 5 yrs - 7.01% 10 yrs - 7.31% Fund is benchmarked against the S&P 500 stock index and the performance is roughly the same. US Mid/Small Cap Equity Fund 1 yr - 25.30% 3 yrs - 19.27% 5 yrs - 8.66% 10 yrs - no data Fund is benchmarked against the Russell Small Cap Completeness Index and the performance is roughly the same. International Equity Fund 1 yr - 17.65% 3 yrs - 6.64% 5 yrs - 0.50% 10 yrs - 7.67% Fund is benchmarked against the MSCI AC Wld ex-US and Foreign Large Fund and the performance is roughly the same. Are these better choices than the Vanguards funds?

As you can see, the company stock has done very well for me over the last 10 year. I have owned the stock for 15 years but I realize I need to start diversifying as I approach retirement which is 10 years away. My investment goal is to have over $1M in my 401K plan when I retire in 10 years. Half way there, but I need help from the folks on this forum.

[ER Eddie]

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Originally Posted by G-Man I assume that all of the dollars in my 401K plan is considered tax deferred dollars. Please confirm?

That's how 401K's usually operate, yes. You'll pay the tax later, when you take the money out, at which point you will presumably be in a lower tax bracket. There are limits on how much you can contribute, though. I think it's 23K/yr if you're over 50. But don't take my word for it. You should do your own research.

[Animorph]

Quote:

Originally Posted by G-Man There seem to be some overlap with the Equity Funds and the Vanguard Funds. For example, the US Large Cap Equity Fund is very similar to the Vanguard PRIMECAP Fund (VPMAX). The Vanguard Fund has a higher Expense Ratio (0.36% vs 0.02%) but a better 1, 3, 5, and 10 Annualized Performance (27.61% vs 20.57%, 18.99% vs 18.43%, 7.28% vs 7.01%, 10.21% vs 7.31%) The US Mid/Small Cap Equity Fund is very similar to the Vanguard Capital Opportunity Fund (VHCAX). The Vanguard Fund has a higher Expense Ratio (0.41% vs 0.045%) but a similar 1, 3, 5, and 10 Annualized Performance (34.07% vs 25.30%, 19.04% vs 19.27%, 7.95% vs 8.66%, 11.21% vs N/A). The Interest Income Fund is very similar to the Vanguard Total Bond Market Index Fund. The Vanguard Fund has a lower Expense Ratio (0.05% vs 0.314%) and a lower 1, 3, 5, and 10 Annualized Performance (-0.81% vs 2.95%, 3.45% vs 3.12%, N/A vs 3.35%, N/A vs 4.04%).

The PRIMECAP funds are well respected, but they are actively managed. Hence the higher expenses and probably larger deviations from the benchmarks. Using them is a matter of philosophy. If you don't fully buy into index fund buy and hold, you might see if these funds look interesting to you. They can be used along with index funds as well.

Everything in your 401k is tax deferred. You didn't pay any income taxes on the amounts contributed. You will pay later. Hopefully withdrawals will be made at a lower tax rate than you currently pay.

[G-Man]

Quote:

Originally Posted by ER Eddie Here's something on that, which was recommended to me earlier, and which I still haven't gotten around to digesting. Principles of Tax-Efficient Fund Placement - Bogleheads

So, as I go through this exercise of rebalancing my 401K Retirement account, should I be concerned about Tax Efficient Placement since all my funds in my 401K account is tax deferred. Please advise.

[G-Man]

I really appreciate all the feedback from the forum members so far. Over the last several days, this forum has opened my mind up to asset allocation. I have been researching this topic a lot over the past several days.

Based on the information I have provided so far, my goal is to retire in 10 years. As you have read so far, I am pretty aggressive and my risk tolerance level is high when it comes to investing (maybe too high or stupid - all my retirement funds in company stock). I would like to break down my 401K asset allocation in 2 five year phases. Here is what I am thinking from an asset allocation point of view:

Next 5 years (2013 - 2018) Asset Allocation
- The investment goal is to be somewhat aggressive during this time period. The risk tolerance level will be medium to high.
- Asset Allocation (80% stocks, 20% bonds)
- 80% Stocks (US Large Equity Index (??%), US Mid/Small Equity Index (??%), International Equity Index (??%), Company Stock (10%)
- 20% Bonds (Not sure which fund(s) yet. I don't have many choices within my 401K plan to choose from)

Next 5 years (2019 - 2004) Asset Allocation
- The investment goal is to be less aggressive during this time period as I near retirement. The risk tolerance level will be medium to low.
- Asset Allocation (60% stocks, 40% bonds)
- 60% Stocks (US Large Equity Index (??%), US Mid/Small Equity Index (??%), International Equity Index (??%), Company Stock (10%)
- 40% Bonds (Not sure which fund(s) yet. I don't have many choices within my 401K plan to choose from.)

Please provide your feedback on my 10 year strategy and asset allocation options.