Just started my first attending job - confused about 403(b) options

[bomgd3]

Hey everyone, I just finished residency and I'm starting my first attending job.  I am 28 years old.  My income will be around $300k this year and my wife is a resident with eventual earning potential also around $300k.  Our hospital uses Voya for financial services.  I met with the Voya guy to set up my 403(b) and he suggested the following asset allocation.  I'll list these as [percent contribution] - <Name (Content)> - <10y return> - <Expense ratio>....

[30%] - "EuroPacific" (85% intl stock) - 2.84% - 1.14%

[30%] - "Intl Value" (88% intl stock) - 5.56% - 0.76%

[10%] - "Small Company" (90% US stock) - 8.52% - 0.9%

[10%] - "Mid Cap" (90% US stock) - 8.15% - 0.86%

[10%] - "Developing Growth" (95% US stock) - 8.27% - 0.99%

[10%] - Vanguard REIT (100% US stock) - 5% - 0.12%

I'd like to simplify/streamline this asset allocation if possible.  I'm not sure if the crappy EuroPacific fund warrants a full 30% of my investments.  I suppose common wisdom is that Asia will rise massively, but on the other hand the returns on that fund seem pretty disappointing despite Asia's rise in the last decade.  Europe seems even less of a sure thing.

What would be a reasonable asset allocation for me at this age?  And what would be the simplest/cleanest way to achieve this?  I'd hugely appreciate any input you guys might have!

[Dreamgiver]

So the allocation is 60% intl, 30% US, 10% REIT?

That seems extremely aggressive in intl allocation, more than I think is reasonable. The only good choice I see is the 10% in Vanguard REIT. Everything else seems to have high fees. Any other Vanguard funds or lower fee funds?

[bomgd3]

Nope, the Vanguard REIT is the only low-fee fund.  Everything else is at least 0.5 and the vast majority are 0.6% and above.

My initial thoughts are to do 70% US, 30% international (not sure where REIT fits in).  What makes this more complicated is that I need to choose between growth, value, blend, etc.  That gets confusing pretty quick.

Are Morningstar ratings a decent way to sort this all out?  It all seems seductively easy when I can pick the five-star fund over the four-star fund, etc...

[jfoxcpacfp]

No, Morningstar fund ratings are not a good way to sort all of this out but I suppose you could do worse. I'm with @Dreamgiver, the recommendation is high on international. I'm fine with 10% REIT fund, 60% mix of large- and small-caps and 30% int'l. We usually split int'l between emerging markets and established co's.

[Hatton]

Your options are bad except for the Vanguard REIT.  You need to meet with HR and try to get the hospital to change the plan.

[Zaphod]

bomgd3 wrote:

Hey everyone, I just finished residency and I’m starting my first attending job.  I am 28 years old.  My income will be around $300k this year and my wife is a resident with eventual earning potential also around $300k.  Our hospital uses Voya for financial services.  I met with the Voya guy to set up my 403(b) and he suggested the following asset allocation.  I’ll list these as [percent contribution] – – <10y return> – ….

[30%] – “EuroPacific” (85% intl stock) – 2.84% – 1.14%

[30%] – “Intl Value” (88% intl stock) – 5.56% – 0.76%

[10%] – “Small Company” (90% US stock) – 8.52% – 0.9%

[10%] – “Mid Cap” (90% US stock) – 8.15% – 0.86%

[10%] – “Developing Growth” (95% US stock) – 8.27% – 0.99%

[10%] – Vanguard REIT (100% US stock) – 5% – 0.12%

I’d like to simplify/streamline this asset allocation if possible.  I’m not sure if the crappy EuroPacific fund warrants a full 30% of my investments.  I suppose common wisdom is that Asia will rise massively, but on the other hand the returns on that fund seem pretty disappointing despite Asia’s rise in the last decade.  Europe seems even less of a sure thing.

What would be a reasonable asset allocation for me at this age?  And what would be the simplest/cleanest way to achieve this?  I’d hugely appreciate any input you guys might have!

Click to expand...

What is the thesis for such a strong EP allocation? Thats nutty.

Are these your only funds? If not what are the other options. Im not sure anyone needs a specific REIT allocation as its in the SP as a sector now, but its the best priced fund you have. Likewise with mid and small cap, add it up with growth and you have a total index. Cut all the junk and give us just the broadest funds you have available, ie, international, total market, us, etc...

[bomgd3]

Zaphod wrote:

bomgd3 wrote:

Cut all the junk and give us just the broadest funds you have available, ie, international, total market, us, etc…

Click to expand...

I don't think I have many "total market" funds, it's all dissected into "growth", "value", "small cap", "mid cap", "large cap", "blend", etc.  I do see a Voya Global Equity Portfolio - Class I (5y yield 7.79%, expense 0.61%) and VY Oppenheimer Global Portfolio Iitial Calss (10y yield 5.35%, expense 0.75%).  It's a bit tough for me to type every single fund but here's the balance I'm considering now (allocation % - name - 10y return - expense ratio):

[50%] Voya Large Cap Growth Institutional Class - 10.67% - 0.67%

[20%] Voya Small Company Portfolio Class I - 8.52% - 0.9%

[20%] MFS International Value Fund Class R4 - 5.56% - 0.76%

[10%] Vanguard REIT Index Fund - Admiral Shares - 5% - 0.12%

Another idea would be to buy one of the global total market funds, for example at 90% allocation, and then just put 10% into Vanguard REIT and call it a day.

[Zaphod]

You can take a screen shot or clip it out with a tool as well. Large cap is basically an S/P type fund so you've already gravitated in the right direction. Trying to ignore the fees :!: , those are fine allocations.

[ajm184]

bomgd3 wrote:

Zaphod wrote:

bomgd3 wrote:

Cut all the junk and give us just the broadest funds you have available, ie, international, total market, us, etc…

Click to expand…

I don’t think I have many “total market” funds, it’s all dissected into “growth”, “value”, “small cap”, “mid cap”, “large cap”, “blend”, etc.  I do see a Voya Global Equity Portfolio – Class I (5y yield 7.79%, expense 0.61%) and VY Oppenheimer Global Portfolio Iitial Calss (10y yield 5.35%, expense 0.75%).  It’s a bit tough for me to type every single fund but here’s the balance I’m considering now (allocation % – name – 10y return – expense ratio):

[50%] Voya Large Cap Growth Institutional Class – 10.67% – 0.67%

[20%] Voya Small Company Portfolio Class I – 8.52% – 0.9%

[20%] MFS International Value Fund Class R4 – 5.56% – 0.76%

[10%] Vanguard REIT Index Fund – Admiral Shares – 5% – 0.12%

Another idea would be to buy one of the global total market funds, for example at 90% allocation, and then just put 10% into Vanguard REIT and call it a day.

Click to expand...

Though I believe the four fund portfolio you have a good asset allocation above for your age.  The 90/10 allocation saves you 50 bps in expense ratio over the 4 fund allocation.  Getting a better, lower expense ratio fund selection will have to be a mid/long term goal, because the Global Portfolio is still about 4x too high.

[bomgd3]

ajm184 wrote:

Though I believe the four fund portfolio you have a good asset allocation above for your age.  The 90/10 allocation saves you 50 bps in expense ratio over the 4 fund allocation.  Getting a better, lower expense ratio fund selection will have to be a mid/long term goal, because the Global Portfolio is still about 4x too high.

Click to expand...

So you think it might be smarter just to go for the total global market fund + REIT?

Here are my fund options.  I managed to scan them with my cell phone.  Sorry about the waviness... stupid book binding, tough to get it to lay flat with one hand and take photo with the other.

https://www.dropbox.com/s/6utgpk38ducdhew/investment%20options.pdf

[ajm184]

Reluctantly, the Voya Global Equity Portfolio along with the Vanguard REIT appears to the best of your poor options from a 'lower' cost/asset allocation standpoint. Your plan has too many similar high cost options, no target date funds, and vast majority are active vs. index funds.  More options in a plan does not mean the plan is working for its participants.

Your four fund asset allocation is also good, though understand you'll be paying an additional 50 bps versus the Voya Global Equity Portfolio.  The Global Equity is an active fund with a focus on dividend paying stocks, though it appears to have an appropriate split between US and Rest of World in terms of country allocation.

You'll need to work with HR, the company's retirement committee to get better options in the future and learn alot more about these plans.  Right now, your company's retirement committee is not working for its plans participants in my opinion.  Voya will not be giving up this business without a fight.

[childay]

Keep in mind your asset allocation can be for your entire investments, not just your 403B

[bomgd3]

Thanks for all of your advice folks.  I ultimately decided to stick with the four-fund portfolio, just so I could have better control of my balance of US vs global stocks.  It's incredible how quickly the fund grows with an attending paycheck.  As a resident I was scrounging up a few hundred bucks here and there to stuff into my Roth IRA.  Now I can deposit big chunks of money with every paycheck, it's fantastic!