Thoughts on allocation/fund selection for 25 year old son

[SnowballCamper]

Deferring in the 401k doesn't present much of an advantage, so I made him switch that to 100% roth. He also saves in his brokerage account and funds a roth IRA. 25 years old with $90,000 across all his accounts.

Yes, absolutely do the Roth. I think the unmatched 401k / deductible IRA becomes appealing when you're in a higher tax bracket, but in the low tax bracket for a younger worker a regular brokerage gives you more options for retiring early (before 59.5). He's off to a great start!

 

[Koolau]

Can anyone tell us why International exposure is good for you. I'm going by my own experience over the last 35 years.

Diversity.

 

[Koolau]

Without the matching funds, and in the 12% tax bracket, is there really much of an advantage to the 401k? Why not just save in a regular brokerage, use one fund, like VTI for now, and pay the low dividend tax rate now, rather than regular income tax rates later? Am I missing something here?

And first fill the Roth IRA before anything else in this situation. YMMV

 

[38Chevy454]

Do the $7K Roth, then the 401k with what he can. Then do a Roth conversion, of course being sensitive to the fact that conversion takes additional money to pay the taxes. That way he could save more than $7K in Roth per year.

 

[WhenIsItTime]

I suggested he participate in the company 401k for the discipline of it then I learned about the deferral and helped him fix that to roth and then learned about the asset allocation and I suggested he fix that, and the company advisor told him he should leave it "cause it's making money" so I showed him how to fix it and now he's on the right path. But, truth told, I've got some regret. Hindsight is 20/20.

This isn't a long term employment situation so I'll show him how to roll it into his individual roth when the time comes.

With eyes on perfection, don't lose sight your son is off to a great start and fortunate to have you to provide advice. I love these stories where 25 year olds are gainfully employed and planning for the future.

Also good life lesson that we all need council from an expert from time to time, but always be skeptical and don't blindly follow.

 

[Kings over Queens]

With eyes on perfection, don't lose sight your son is off to a great start and fortunate to have you to provide advice. I love these stories where 25 year olds are gainfully employed and planning for the future.

Also good life lesson that we all need council from an expert from time to time, but always be skeptical and don't blindly follow.

Such a nice thing to say, and thank you.

We are blessed to have 3 wonderful adult children, 24, 25 and 27. Each has earned and saved their own money and all are working and looking to grow in their careers, but also, have become the type of adult we are comfortable sharing our money with as we can. They show no sense of entitlement and a deep appreciation when do things for them. I couldn't ask for more.

 

[Sunset]

Without the matching funds, and in the 12% tax bracket, is there really much of an advantage to the 401k? Why not just save in a regular brokerage, use one fund, like VTI for now, and pay the low dividend tax rate now, rather than regular income tax rates later? Am I missing something here?

Because the limits on contributions to 401K are (at least used to be) a LOT higher than regular outside IRA/Roths. Plus can contribute to both in many cases: 401K max plus individual IRA/Roth.

 

[PlayinwithFIRE]

"There is no match, so no real incentive to participate, but he does."


Pre-tax dollars is already more than a match in itself. I wouldn't say there is no real incentive.

 

[Kings over Queens]

"There is no match, so no real incentive to participate, but he does."


Pre-tax dollars is already more than a match in itself. I wouldn't say there is no real incentive.

He's 25 in lower end of the 12% bracket and is not deferring.

 

[RetMD21]

IDK why you would use an equity income fund. Retirement plans may get access to the low fee version of . American Century and other more expensive funds.

 

[Stormy Kromer]

Skip the Financial Planner.

Fill your Roth with VG Total Stock Index. Then fill your other investments in VG Total Stock Index (I would consider EFT) and get back to work. You'll whoop any Financial Planner out there. Call me in 30 years.

Don't diversify for the sake of diversity..... That is a Financial Planners' go to to make it look complicated. Less their 1% to tell you so.

 

[Kings over Queens]

I rebalanced the account last week as follows.

70 VFIAX
15 VIMAX
15 VSMAX

as soon as he moves on to another job I'll roll this out of the current home into his own Roth IRA. I know, I know....ERISA. Not really worried about it.

 

[Murdock75]

Let me get your take on this.

25 year old son has access to a 401k at work. There is no match, so no real incentive to participate, but he does.

The financial advisor, who happens to be a friend (kids went to high school together), guided him to the following allocations.

24.4% into TWEIX (american century equity income)
25.15% into FUNYX (pioneer fundamental growth Y)
15.41% into VIMAX (vanguard mid cap index)
15.61% into VSMAX (vanguard small cap index)
9.65% into JPVZX (JPMorgan developed international value r2)
9.77% into RNWGX (american funds new world r6)
(The totals are off by a smidge due to rounding)

I should mention that VFIAX is an available option.

Thoughts?

I invest for my grandkids Roth IRAs and rough allocation 25% each SPY and QQQ, 20% SMH, 15% NVDA, and some smaller positions WDC, TSM, MSFT, V, HD, VRT. I know very aggressive and some duplication in ETFs, but easy to adjust if market conditions change.