My 401K........how much to invest yearly?

[Fritzo]

I didn't think you could do more than 15%?

 

[Special K]

Originally posted by: dullard

Originally posted by: shadow9d9
Why can't you invest your emergency fund just like your iras? Taxes aren't bad for long term gains.

You can, and that is exactly what I'm arguing to do. Have your emergency fund available, but NOT in cash form. Have $12k in a taxable stock investment account. Have $12k in your house with a HELOC. Etc. Anything that pays more than cash investments.

I'm not sure if you are a regular reader of the Fatwallet Finance forum, but I see many people in there who have large sums of money put into whatever online savings account is currently offering the best rates. I have seen some people claim to have 100k+ sitting in FNBO's 6% savings account right now.

Do you have any insight as to why people would be doing this, based on what you said earlier? Do they have really high month-to-month expenses, and that 100k really is their emergency fund? Are they rolling around in so much money that they just decided to put an extra 100k in a savings account just for the heck of it? Maybe all the money came from an AOR? Are they incredibly risk averse? I have no idea.

 

[her209]

If you're single, why not contribute to a traditional IRA, assuming you qualify for all of the tax savings benefits, and then switch over to Roth IRA when you get married?

 

[Azurik]

Originally posted by: Special K

Originally posted by: dullard

Originally posted by: shadow9d9
Why can't you invest your emergency fund just like your iras? Taxes aren't bad for long term gains.

You can, and that is exactly what I'm arguing to do. Have your emergency fund available, but NOT in cash form. Have $12k in a taxable stock investment account. Have $12k in your house with a HELOC. Etc. Anything that pays more than cash investments.

I'm not sure if you are a regular reader of the Fatwallet Finance forum, but I see many people in there who have large sums of money put into whatever online savings account is currently offering the best rates. I have seen some people claim to have 100k+ sitting in FNBO's 6% savings account right now.

Do you have any insight as to why people would be doing this, based on what you said earlier? Do they have really high month-to-month expenses, and that 100k really is their emergency fund? Are they rolling around in so much money that they just decided to put an extra 100k in a savings account just for the heck of it? Maybe all the money came from an AOR? Are they incredibly risk adverse? I have no idea.

Special K,

I am actually more known for my posts in Fatwallet Finance and one of the adopters of the AOR game. The point of this process is to reap extensive rewards along with borrowing a significant amount of money for free. We channel this capital (that we have to pay back eventually) to a safe interest bearing vehicle (such as the 6% CD you stated). The point is to make FREE money off of "someone else's" money. Putting this capital into the equity market just poses too much reach for the short-term. If stocks take a downturn during this time, most people don't have that kind of money to pay back to their creditors.

 

[alrocky]

Originally posted by: Fritzo
I didn't think you could do more than 15%?

IRS 2007 401(k) limit

"The limit is $15,000 for 2006 and increases to $15,500 for 2007."

Your employer may set a percentage limit.

 

[Special K]

Originally posted by: rufruf44

Originally posted by: Pliablemoose
Welll...

Here's my take

1.) Fund your 401K and put your $ in the most agressive funds you can invest in. Your maximum contribution is currently $15,500 (including your employer matching for those under 50 years old)

2.) If after you calculate getting the maximum into your 401K you have some spare cash, put another $4,000/year in a Roth IRA if you qualify to contribute to a Roth (google for the yearly income limits)

At your age, you should attempt to become a multi millionaire. and you can do it.

Only 9% of people have >$250K saved up, of those over 40, 14% have $250K or more saved.

<---I'm a 14%er, and happy as hell I listened to a friend when I was in my early 30's and started seriously saving $.

I recently rolled over my orphaned 401K's into a discount broker rollover IRA and I'm having a blast making those massive stock purchases & sales.

That's a disaster waiting to happen if that fund in the 401K plan is a mediocre one. There're plenty of 401K plan with terrible choices. One of the advantage of IRA is complete control of the investment.

How do you evaluate the 401k plan's choices? What makes them poor or mediocre? I just received my company's 401k info booklet and am researching all of the choices they offer through Fidelity. Does Google Finance give good info? The most aggressive fund my plan offers has a 5-star rating by Morningstar for its 10 year rating. Is that good?

This question was directed to anyone, not just to rufruf44.

 

[LS20]

Originally posted by: Special K
The most aggressive fund my plan offers has a 5-star rating by Morningstar for its 10 year rating. Is that good?

This question was directed to anyone, not just to rufruf44.

You can rate past performance, but you can't predict future performance :moon:

edit: "predict" = guarantee

 

[alrocky]

Originally posted by: Special K
How do you evaluate the 401k plan's choices? What makes them poor or mediocre? I just received my company's 401k info booklet and am researching all of the choices they offer through Fidelity. The most aggressive fund my plan offers has a 5-star rating by Morningstar for its 10 year rating. Is that good?

This question was directed to anyone, not just to rufruf44.

no load, low expense ratio, low turnover, index funds

Expense Ratio:
a) 0.10% - Spartan 500 Index Investor - FSMKX
b) 0.10% - Spartan Extended Mkt Index Inv - FSEMX
c) 0.10% - Spartan Total Market Index Inv - FSTMX
d) 0.10% - Spartan International Index Inv - FSIIX

[a) +b) = c)]

If you can get Fidelity's Spartan funds and avoid the $10k initial minimum, get 'em. The top 2 listed (in a ~7:3 ratio) = FSTMX. The bottom 2 gives you great diversification and basically covers the world at a dirt cheap expense ratio of 0.10% They could represent the bulk or core of your portfolio.

 

[Special K]

Originally posted by: alrocky

Originally posted by: Special K
How do you evaluate the 401k plan's choices? What makes them poor or mediocre? I just received my company's 401k info booklet and am researching all of the choices they offer through Fidelity. The most aggressive fund my plan offers has a 5-star rating by Morningstar for its 10 year rating. Is that good?

This question was directed to anyone, not just to rufruf44.

no load, low expense ratio, low turnover, index funds

Expense Ratio:
a) 0.10% - Spartan 500 Index Investor - FSMKX
b) 0.10% - Spartan Extended Mkt Index Inv - FSEMX
c) 0.10% - Spartan Total Market Index Inv - FSTMX
d) 0.10% - Spartan International Index Inv - FSIIX

[a) +b) = c)]

If you can get Fidelity's Spartan funds and avoid the $10k initial minimum, get 'em. The top 2 listed (in a ~7:3 ratio) = FSTMX. The bottom 2 gives you great diversification and basically covers the world at a dirt cheap expense ratio of 0.10% They could represent the bulk or core of your portfolio.

Thanks for the info, although my company does not offer any index funds through the 401k. Still useful to have for when I open my own investment accounts though.

 

[alrocky]

Well, what Fidelity mutual funds are available thru your 401(k)?

 

[Special K]

Originally posted by: alrocky
Well, what Fidelity mutual funds are available thru your 401(k)?

Here is the complete list (arranged from least risky to most risky, according to Fidelity):

Vanguard Admiral Treasury Money Market Fund Administrative Class
Managed Income Fund
Western Asset Core Bond Portfolio FI Class
Dodge and Cox Balanced Fund

Lord Abbett Affiliated Fund Class A
Allianz NFJ Small-Cap Value Fund Institutional Class

Spartan US Equity Index Fund Investor Class (OK, I guess we do have an index fund)
Fidelity Small Cap Stock Fund

Harbor Capital Appreciation Fund
Duncan-Hurst Capital Management Aggressive Small Cap Growth Fund

Brandes Institutional International Equity Fund

 

[maddogchen]

i put 25% in my 401k last year. I felt like I was behind in my retirement so I had to do more to catch up. Plus it dropped me into a lower tax bracket.

I've neglected my ROTH IRA though. So this year I'm only putting in 21%. But my company gives me 9% so I'm happy. Of course I'm single and don't have much expenses, no cars, no mortgages, no credit card debt.

 

[KCfromNC]

Originally posted by: Special K

How do you evaluate the 401k plan's choices? What makes them poor or mediocre? I just received my company's 401k info booklet and am researching all of the choices they offer through Fidelity. Does Google Finance give good info? The most aggressive fund my plan offers has a 5-star rating by Morningstar for its 10 year rating. Is that good?

This question was directed to anyone, not just to rufruf44.

A great way to underperform the market is to pick 5-star funds for no reason other than the fact that they are 5 star funds.
http://www.edhec-risk.com/rese...Review.2007-06-18.1329
http://www.forbes.com/investme...cz_jb_1117soapbox.html
Lots of other research shows the same thing.

Easiest way to evaluate funds is to look at their expense ratio. You can't predict performance, but you can predict how much each fund is going to cost you.

None of the funds you've listed are terrible. A few have more than .75% ER (sort of medium expensive but not obvious rip off territory), but there's nothing in the bend over >1.5% category either.

Instead of picking particular funds, you should be looking at the overall portfolio. Research shows that the best prediction of future returns is not the particular funds you pick, but the % of stocks vs bonds you own. This sets how much risk you're willing to take and the return you're shooting for. Don't overestimate how much risk you can stand unless or until you make it through a bull market, either.

So first, pick a stock/bond split based on how much risk you want to take, then among the stocks figure out how much international you need. After that, decide if you want to track the market or weight towards a particular size or value. Then, finally, pick funds which give you the asset allocation you need. And don't over-buy ... you can have a well diversified portfolio covering bonds, and domestic and international stocks using 3-5 funds.

 

[Nerva]

i do believe there is a maximum amount that you can contribute on an annual basis. i believe this limit depends on your income bracket. i would contribute to that maximum amount.

also i would double check on your company's policy on matching. they might match right now, but requires you to stay with the company for a certain number of years before they vest.

 

[Pliablemoose]

Originally posted by: 3cho
i do believe there is a maximum amount that you can contribute on an annual basis. i believe this limit depends on your income bracket. i would contribute to that maximum amount.

also i would double check on your company's policy on matching. they might match right now, but requires you to stay with the company for a certain number of years before they vest.

It's $15.5K if you're under the age of 50 at the moment, the other thing to consider even if you aren't going to be vested for some time is that the earnings you get from the matching funds are yours to keep, they just keep the matching funds if you leave & you're not vested.

 

[Nerva]

Originally posted by: Pliablemoose

Originally posted by: 3cho
i do believe there is a maximum amount that you can contribute on an annual basis. i believe this limit depends on your income bracket. i would contribute to that maximum amount.

also i would double check on your company's policy on matching. they might match right now, but requires you to stay with the company for a certain number of years before they vest.

It's $15.5K if you're under the age of 50 at the moment, the other thing to consider even if you aren't going to be vested for some time is that the earnings you get from the matching funds are yours to keep, they just keep the matching funds if you leave & you're not vested.

yes that sounds about right. and also, when you are young, you can be choose to be more risk loving. as years go on, you should become more risk averse.

 

[crystal]

Originally posted by: Pliablemoose
.. Your maximum contribution is currently $15,500 (including your employer matching for those under 50 years old)

I way I read this - max 401K = 15.5k = your $ + company match.

At first I thought it was this way too - but I google and got this.

Do Employer 401k Contributions Count Toward the Max?

Short answer - no. In a 401(k) the employer match does not count towards the annual maximum contribution. In 2006 the IRS limits your maximum contribution to $15,000 (plus $5,000 catch-up contribution for those over the age of 50). In 2007 the limits are currently the same.

money to your 401k = 15.5k (your $) + company match.

 

[Pliablemoose]

Originally posted by: crystal

Originally posted by: Pliablemoose
.. Your maximum contribution is currently $15,500 (including your employer matching for those under 50 years old)

I way I read this - max 401K = 15.5k = your $ + company match.

At first I thought it was this way too - but I google and got this.

Do Employer 401k Contributions Count Toward the Max?

Short answer - no. In a 401(k) the employer match does not count towards the annual maximum contribution. In 2006 the IRS limits your maximum contribution to $15,000 (plus $5,000 catch-up contribution for those over the age of 50). In 2007 the limits are currently the same.

money to your 401k = 15.5k (your $) + company match.

Yep, you're right. Crap, I don't think I can afford the 33%/paycheck I'd need to max out on this deduction for 07, am currently at 19% & it's a stretch

 

[rufruf44]

Originally posted by: Special K

Originally posted by: alrocky
Well, what Fidelity mutual funds are available thru your 401(k)?

Here is the complete list (arranged from least risky to most risky, according to Fidelity):

Vanguard Admiral Treasury Money Market Fund Administrative Class
Managed Income Fund
Western Asset Core Bond Portfolio FI Class
Dodge and Cox Balanced Fund

Lord Abbett Affiliated Fund Class A
Allianz NFJ Small-Cap Value Fund Institutional Class

Spartan US Equity Index Fund Investor Class (OK, I guess we do have an index fund)
Fidelity Small Cap Stock Fund

Harbor Capital Appreciation Fund
Duncan-Hurst Capital Management Aggressive Small Cap Growth Fund

Brandes Institutional International Equity Fund

Well, do you have a particular investing plan you wish to pursue? Do you want to overweight or a particular sector (large cap vs small cap, intl vs domestic) ?

I would use the 9 style box method and use the morningstar x-ray tools to see where your current holding is really at compared to where you want to be.

Morningstar rating is only one of many things to rate a particular funds. Return vs a comparable index, expense ratio, turnover rate, fund's manager tenure etc iare some of the major things to look at on a particular funds.

Also does Fidelity allows access to brokeragelink from your 401k? You can contribute to a lot more NTF funds via that (I won't touch the non-NTF funds, since the transaction cost will just negate any advantage you might have....unless you're transferring large chunk).

 

[alrocky]

Originally posted by: Special K
Here is the complete list (arranged from least risky to most risky, according to Fidelity):

Vanguard Admiral Treasury Money Market Fund
Managed Income Fund
(WATFX) 0.47% ER bond - Western Asset Core Bond Portfolio FI
(DODBX) 0.52% ER mod allocation - Dodge and Cox Balanced Fund

(LAFFX 0.82% ER LV - Lord Abbett Affiliated Fund Class A
(PSVIX) 0.86% ER SG - Allianz NFJ Small-Cap Value Fund Institutional

(FUSEX) 0.09% ER LB - Spartan US Equity Index Fund Investor Class
(FSLCX) 0.94% ER SB - Fidelity Small Cap Stock Fund

(HACAX) 0.67% ER LG - Harbor Capital Appreciation Fund = M* PICK
? Duncan-Hurst Capital Management Aggressive Small Cap Growth Fund

? Brandes Institutional International Equity Fund

Your basic asset allocation is a Large Cap, Small Cap, Foreign, and perhaps Bonds.

The No Brainer get-this-now fund on your list is:

(FUSEX) 0.09% ER LB - Spartan US Equity Index Fund Investor Class. Dirt cheap expense ratio of 0.09% and low turnover. It's a LB or Large Blend fund that represents the CORE holding of your Large Caps.

Your Small Cap choices require more thought. You might want to pass on it now or open an IRA and place a Small Cap or Foreign fund in it. Visit Morningstar.com and plug in the fund ticker for more information on the various funds.

 

[Special K]

Originally posted by: alrocky

Originally posted by: Special K
Here is the complete list (arranged from least risky to most risky, according to Fidelity):

Vanguard Admiral Treasury Money Market Fund
Managed Income Fund
(WATFX) 0.47% ER bond - Western Asset Core Bond Portfolio FI
(DODBX) 0.52% ER mod allocation - Dodge and Cox Balanced Fund

(LAFFX 0.82% ER LV - Lord Abbett Affiliated Fund Class A
(PSVIX) 0.86% ER SG - Allianz NFJ Small-Cap Value Fund Institutional

(FUSEX) 0.09% ER LB - Spartan US Equity Index Fund Investor Class
(FSLCX) 0.94% ER SB - Fidelity Small Cap Stock Fund

(HACAX) 0.67% ER LG - Harbor Capital Appreciation Fund = M* PICK
? Duncan-Hurst Capital Management Aggressive Small Cap Growth Fund

? Brandes Institutional International Equity Fund

Your basic asset allocation is a Large Cap, Small Cap, Foreign, and perhaps Bonds.

The No Brainer get-this-now fund on your list is:

(FUSEX) 0.09% ER LB - Spartan US Equity Index Fund Investor Class. Dirt cheap expense ratio of 0.09% and low turnover. It's a LB or Large Blend fund that represents the CORE holding of your Large Caps.

Your Small Cap choices require more thought. You might want to pass on it now or open an IRA and place a Small Cap or Foreign fund in it. Visit Morningstar.com and plug in the fund ticker for more information on the various funds.

I'm sure I'll get owned by someone using Google for asking this, but how can I find information on the Duncan-Hurst Capital Management Aggressive Small Cap Growth Fund? The Fidelity booklet says it doesn't have a ticker symbol because it is "a growth fund, not a mutual fund" (direct quote). I even went to Duncan-Hurst's website and couldn't find it listed there.

Also, the code for the last fund listed is BIIEX. The expense ratio seems high (1.12%), but isn't it a good idea for an aggressive investor to have a decent chunk of the investment (at least 25% or so) in some type of international stocks?

 

[alrocky]

this might be it As stated it appears not to be a mutual fund and would not follow the same rules, making it harder to evaluate. It appears a tad expensive and fund assets shrinking. You may list your choices here: Diehards.org and ask.

Allianz NFJ Small Cap Value Instl (PSVIX) appears to be decent Small Cap Value fund.

Yes, it's a "good idea for an... investor to have a decent chunk of the investment (at least 25% or so) in some type of international stocks". The investor needn't be "aggressive." BIIEX's ER is ok but you can find better if you place your international holding in an IRA.

Get FUSEX. Ha! - F.U. sex

 

[Special K]

Originally posted by: alrocky
this might be it As stated it appears not to be a mutual fund and would not follow the same rules, making it harder to evaluate. It appears a tad expensive and fund assets shrinking. You may list your choices here: Diehards.org and ask.

Allianz NFJ Small Cap Value Instl (PSVIX) appears to be decent Small Cap Value fund.

Yes, it's a "good idea for an... investor to have a decent chunk of the investment (at least 25% or so) in some type of international stocks". The investor needn't be "aggressive." BIIEX's ER is ok but you can find better if you place your international holding in an IRA.

Get FUSEX. Ha! - F.U. sex

How should I allocate my contribution among the other funds? What % should I allocate to FUSEX? I'll eventually start my own Roth IRA that I can fully customize, but is that BIIEX worth having in my 401k now? I read a good rule of thumb was 120 - age as a percentage invested in stocks for someone who is young and looking to take on a fair amount of risk, so I guess I could have 96% in stocks?

 

[SinNisTeR]

I need to invest more.. The company I work for offers a Roth 401k and a regular 401k. I've only been with the company 2 years and investing for 1. I'm currently 25 and I have some of my money in the regular 401k and recently stopped putting money into it and transferred over to the Roth 401k (since they started offering). My employer matches up to 15% and they also put in profit sharing (5.1% of my weekly pay into my Roth 401k). I'm only putting in 7% as of now. I've never had credit card debt and I just paid off my $15k loan in about 18 months and am now going to do the full 15%.

 

[alrocky]

Special K,

(FUSEX) 0.09% LB - Spartan US Equity Index
(PSVIX) 0.86% SG - Allianz NFJ Small-Cap Value
(BIIEX) 1.12% F-LV - Brandes Institutional International
(WATFX) 0.47% bond - Western Asset Core Bond

(VEXMX) 0.25% MB - Vanguard Extended Market Index
(NAESX) 0.23% SB - Vanguard Small-Cap Index
(VISVX) 0.23% SV - Vanguard Small-Cap Value Index

(VGTSX) 0.32% F-LB - Vanguard Total International Stock Index
(VFWIX) 0.40% F-LB - Vanguard FTSE All-World ex-US Index

(VBMFX) 0.20% bond - Vanguard Total Bond Market Index

----

(FUSEX) - 50%
(PSVIX) - 15%
(BIIEX) - 25%
(WATFX) - 10%

A rough percentage allocation if you want 4 funds in your 401(k). Also listed are Vanguard funds for your ROTH IRA which would replace PSVIX or BIIEX. (PSVIX and BIIEX appear to be your best choices within your 401(k) for small cap and foreign, but if you're opening a ROTH IRA, you can replace one of them; one of the three Vanguard funds for small cap or either of the two for foreign.) Note the expense ratios of the Vanguard funds are quite low. Suggest you post your choices at the diehards.org forum and ask for their recommendation. FUSEX is the only fund that I can strongly suggest you get for your 401(k).

A good rule of thumb is to save and invest as much as you can - you'll thank yourself at retirement!