bad 401 k options with work complicating retirement accounts

[billy]

Hi all,

I get to finally put into my employer's 401k that they have with merrill lynch, but once I saw the choices I was pretty disappointed. There was only one or 2 passively managed index fund available, and the international fund charges a 12b-1 (although overall its expense ratio is just 0.4% so not horrible).  I had kept a 403b from residency and a 457 plan from my previous job, along with Roth IRAs that I now backdoor and an HSA. I was hoping to consolidate/rollover a lot of the funds (I had 22 different funds way too much) once I knew my 401k options to simplify things, but it seems I'll be stuck with multiple investments since the old 403 and 457 plans have better options. So this is what I finally came up with, and I will end up using the old 457 and 403b to rebalance as my 401k grows. I aim for (and currently hold) roughly a 70% stocks (40% US large, 5% US mid, 5% US small, 20% international), 5%REIT, 25% bond mix. I'm 37 but went to med school late so have only been an attending for a year and a half so far, with a little over 6 figures invested, all in non-taxable accounts. Any thoughts are appreciated. I'm still paying down student loans but maximizing the available tax deferred/roth/hsa space available to me. Am I on the right road to Dublin?

Employer's 401k: will put 75% in Blackrock SP 500 Index (inst) and 25% in the blackrock International Index (class A)--> they were the only 2 funds with expense ratios under 0.5 and passively managed

Roth IRAs:

Vangaurd Target 2040 (plan on using this to increase REIT exposure as needed)

Vanguard REIT (only reit exposure)

Fidelity 500 index

Fidelity Bond Index (FBIDX)   (I plan on using this to increase my bond exposure from the FID 500 index as needed, slowly eliminating the Fid 500 index as my hsa and 401k grow)

HSA: Vanguard Total Stock Index (only good choice available)

457 plan:

Vanguard Instituional index

Vanguard Midcap Index

Vangaurd Total Bond Fund Index (will also similarly be decreasing the institutional index to rebalance the Midcap and Bond as needed)

403 via TIAA CREF

TIAA Access Large Growth Cap Index

TIAA small cap blend index --> this will be changed to vanguards small cap in Jan when institutional fares are offered

TIAA access International Equity Index

TIAA Access Bond Index (I also expect to use these funds to rebalance the large growth into small cap or bond as needed).

TIAA Guaranteed (will be used to rebalance as needed and eliminated by DEC 2017; I counted this as a bond for my allocation).

So there it is, 15 funds but all with expense ratios  0.4% or under, with most under 0.2%.

Thanks and Merry Christmas,

Billy

[DMFA]

The bulk of your contributions in coming years will probably be to that 401k, so I'd focus on whatever you want the bulk of your portfolio to be, which from looking at it, I'd guess is domestic equities.

Why do you crave all that complexity? Are you trying to tilt toward small-mid in your tax deferred?

Your asset allocation does not have to have similar percentages in each account. For instance, one IRA could be like 40% bonds, but they could form about 10% of the whole portfolio, which is what matters.

[billy]

Thanks for your response. I do want a small tilt towards mid/small cap, and know that in the future the bulk of my money will go towards the 401k. Im trying to simplify things, but due to the bad choices in my 401k (most other funds are actively managed with fees close to or over 1percent) I kept all the other funds. I do hope to simplify them over the years as I eliminate the large domestic stock in the other accounts (except for the HSA) and use them to fund the bonds, small and mid cap parts of the accounts. Im hoping to eliminate 3-5 funds over the next few years as that gets accomplished.

BTW, now my asset allocation is spread over all the accounts, not the same in each one. Unfortunately earlier on in my investing for retirement I did not realize that and had an even bigger headache with more funds. Since then I've read some books and found this site, and have been trying to get myself on the correct path. I guess I could also transfer/roll over money from some of the old work plans (457 and 403 have about 90,000 in them) to further simplify things but I'm worried about the tax consequences as I also use backdoor Roths each year.

 

[litovskyassetmanagement]

billy wrote:

Thanks for your response. I do want a small tilt towards mid/small cap, and know that in the future the bulk of my money will go towards the 401k. Im trying to simplify things, but due to the bad choices in my 401k (most other funds are actively managed with fees close to or over 1percent) I kept all the other funds. I do hope to simplify them over the years as I eliminate the large domestic stock in the other accounts (except for the HSA) and use them to fund the bonds, small and mid cap parts of the accounts. Im hoping to eliminate 3-5 funds over the next few years as that gets accomplished.

BTW, now my asset allocation is spread over all the accounts, not the same in each one. Unfortunately earlier on in my investing for retirement I did not realize that and had an even bigger headache with more funds. Since then I’ve read some books and found this site, and have been trying to get myself on the correct path. I guess I could also transfer/roll over money from some of the old work plans (457 and 403 have about 90,000 in them) to further simplify things but I’m worried about the tax consequences as I also use backdoor Roths each year.

 

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If your employer is a group practice or a small hospital, it might be possible to get them to make changes to your plan.  While it is not easy to do, it is something that I always recommend trying. The idea is to get them set up with an ERISA 3(38) fiduciary who can significantly decrease the plan's cost by using low cost index funds.  I'm sure that even record-keeping expenses can be minimized by using a low cost provider.  This plan most likely hasn't been reviewed for a while, so getting your employer to do so can be good for everyone involved: employer will lower their cost and make the employees happy, and if this is a group practice, the partners will all benefit from lowering their plan costs.