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Message
Good 401k Company Match w/ Terrible Options. Account allocation help as well
Posted on 4/9/12 at 6:06 pm
Posted on 4/9/12 at 6:06 pm
So, I don't qualify for my company 401k for a little while longer, but got some info from HR to plan for it and was looking for some money allocation advice.
First, the match is 100% on 3 percent and then 50% on up to 5 percent.
At 65,000 a year base salary, I believe that would be $3,250 (5% of salary contribution) from me, and $1,950 (100% of 3%) + $650 (50% of the remaining 2%) from the company. The fund company my company is using is OneAmerica. I find their options to be awful (they have a "Socially Responsive" Fund for frick's sake), and basically want to get my company match and then stop contributing. Good idea?
So, max that out plus maxing out Roth IRA with Vanguard at 5,000 would cost me 8,250 a year.
I can put more than this away a year, so the extra investment funds would go with Vanguard. I plan on doing a basic Vanguard indexing strategy using VTI, BND, VXUS and VNQ.
Wouldn't I allocate the bond ETF into the Roth to take advantage of the tax advantage and do the rest (VTI, VXUS, VNQ) outside the Roth?
Just want to make sure I have this all right. Thanks for the help.
First, the match is 100% on 3 percent and then 50% on up to 5 percent.
At 65,000 a year base salary, I believe that would be $3,250 (5% of salary contribution) from me, and $1,950 (100% of 3%) + $650 (50% of the remaining 2%) from the company. The fund company my company is using is OneAmerica. I find their options to be awful (they have a "Socially Responsive" Fund for frick's sake), and basically want to get my company match and then stop contributing. Good idea?
So, max that out plus maxing out Roth IRA with Vanguard at 5,000 would cost me 8,250 a year.
I can put more than this away a year, so the extra investment funds would go with Vanguard. I plan on doing a basic Vanguard indexing strategy using VTI, BND, VXUS and VNQ.
Wouldn't I allocate the bond ETF into the Roth to take advantage of the tax advantage and do the rest (VTI, VXUS, VNQ) outside the Roth?
Just want to make sure I have this all right. Thanks for the help.
This post was edited on 4/9/12 at 6:08 pm
1
Posted on 4/9/12 at 6:12 pm to Teddy Ruxpin
I'm pretty sure REITS need to be in tax advantaged accounts to make sense, but someone more tax literate should verify that.
What about contributing to an HSA?
Also, the funds would have to be really awful to be worse than carrying funds outside of a tax advantaged account.
What about contributing to an HSA?
Also, the funds would have to be really awful to be worse than carrying funds outside of a tax advantaged account.
Posted on 4/9/12 at 6:22 pm to TheHiddenFlask
quote:
Also, the funds would have to be really awful to be worse than carrying funds outside of a tax advantaged account.
I got a link to the company in my post. What do you think? My knowledge on the subject just doesn't like them at all.
On the HSA front, I definitely need to educate myself on them. I have health, dental, vision through my employer, just not too sure what the HSA can do for me. Any helpful links?
I've read a number of books on investing, so I'm not a complete novice and I'm financially inclined. I love this stuff.
Posted on 4/9/12 at 6:28 pm to TheHiddenFlask
If you have shitty options, go for the least risky option. You are still getting good gains with the match. No need to be greedy. Later you can rollover to an IRA and have more freedom to invest in whatever you want. Max out your Roth or traditional IRA if you can and if you have any left over look at other investments. 529, HSA, or something that isn't tax advantaged or tax deferred. Just my $.02
Posted on 4/9/12 at 6:37 pm to aaronb023
Ya, that was what I was thinking, take the match and run if there were better options for my money.
I find it annoying that I would only be able to invest $5,000 a year with Vanguard. I just want some freedom baby.
I find it annoying that I would only be able to invest $5,000 a year with Vanguard. I just want some freedom baby.
Posted on 4/9/12 at 6:53 pm to Teddy Ruxpin
Some may disagree and say to max tax deferred. You MAY be better off if your tax rate is lower when you retire but that's not a given. you may be able to get better gains somewhere else. I'd prefer to invest in something that produces income like rental property, residential or commercial, or a small business or something. But that's just me. I don't like to trust ALL my money with people or companies that I don't have any control over.
Posted on 4/9/12 at 8:50 pm to TheHiddenFlask
quote:
What about contributing to an HSA?
I do this and heartily recommend it. There is still an annual out-of-pocket maximum that isn't too bad, but if you get started while you're young you can pile up a lot, especially if the company contributes a lot as well (many will). Unlike flex dollars, it isn't "use it or lose it" and at age 59 1/2 it basically becomes a regular IRA.
quote:
the funds would have to be really awful to be worse than carrying funds outside of a tax advantaged account.
This. Yes, a lot of plans have crappy options but being tax-advantaged makes up for a lot.
Posted on 4/9/12 at 8:51 pm to aaronb023
quote:
I'd prefer to invest in something that produces income like rental property, residential or commercial, or a small business or something. But that's just me. I don't like to trust ALL my money with people or companies that I don't have any control over.
To each his own, just don't forget to include the cost of your time spent managing the properties/business/etc.
Posted on 4/9/12 at 11:07 pm to Teddy Ruxpin
quote:
I got a link to the company in my post. What do you think? My knowledge on the subject just doesn't like them at all.
I had trouble figuring out what funds were available. Even Vanguard's website kicks their butt!
Surely they have some type of low cost index funds, at least something that follows the S&P.
Posted on 4/10/12 at 1:15 am to CoolHand
Oh, you would be oh so wrong about them having an index fund. On my phone so here is the url for where they list the 5 funds they have: LINK
Their website is awful. On the health savings account front I dug through some stuff and found I just got to set one up with whomever I want. Found health savings administers who offer 22 Vanguard funds so I'll probably use them. If I max that out and TD is still around we'll see what other things I can do.
thanks
Their website is awful. On the health savings account front I dug through some stuff and found I just got to set one up with whomever I want. Found health savings administers who offer 22 Vanguard funds so I'll probably use them. If I max that out and TD is still around we'll see what other things I can do.
thanksPosted on 4/10/12 at 8:08 am to foshizzle
If you want to generate income from your investments you can invest in REITS as Flask said. The benefits of REITs:
- great yield NLY pays 13%= equivalent of rental income without the hassle of having to manage a property yourself
- REITS by their nature offer some tax advantages in terms of their dividend. Part of the dividend they pay out comes from depreciation and such and is not taxable as a cap gain. The trust also by nature avoids corporate taxes by paying out 90%+ of their income.
As far as tax sheltered stuff goes, yes they are better in tax sheltered accounts. However, this is will be drastically more important come Jan 13 if the bush tax cuts aren't renewed.
Make sure in your indexing you include something that tracks a world index. While the academic arguments for the returns of indexing can be compelling, I'm not a big fan of indexing just American or even developed indexes. Oh and MAX out your employer match, it's free money
- great yield NLY pays 13%= equivalent of rental income without the hassle of having to manage a property yourself
- REITS by their nature offer some tax advantages in terms of their dividend. Part of the dividend they pay out comes from depreciation and such and is not taxable as a cap gain. The trust also by nature avoids corporate taxes by paying out 90%+ of their income.
As far as tax sheltered stuff goes, yes they are better in tax sheltered accounts. However, this is will be drastically more important come Jan 13 if the bush tax cuts aren't renewed.
Make sure in your indexing you include something that tracks a world index. While the academic arguments for the returns of indexing can be compelling, I'm not a big fan of indexing just American or even developed indexes. Oh and MAX out your employer match, it's free money
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