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Asset Allocation Help

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  • Asset Allocation Help


    New attending starting at my first full time job and I'm trying to decide on assets for my 401K. Currently in my early 30s, no kids, hope to be FI in ~15 years. My hospital uses Empower retirement and it seems like assets I can choose from are pretty limited with the majority being T. Rowe Price Target funds... Expense ratios are next to funds.

    Vanguard Developed Markets Index Adm - .07%
    American Funds Europacific Gr R6 - .46%

    Small Cap
    American Beacon Small Cp Val R5 - 0.83%
    PGIM Jennison Small Company R6 - 0.7%

    Mid Cap
    Vanguard Extended Market Idx I - .05%

    Large Cap
    State Street S&P 500 - .16%
    Harbor Capital Appreciation Instl - .67%
    Hartford Dividend and Growth Fund Class Y - .69%

    Mainstay MacKay Corporate Bond - 0.6%
    PIMCO Real Return Fund - 0.45%
    SEI Core Fixed - 0.41%

    T Rowe Price Target Fund 2055 - 0.63%

    Rudimentary Plan:
    International: Vanguard developed market - 20%
    Large Cap: State Street S&P 500 - 30%
    Mid Cap: Vanguard Extended Market - 30%
    Small Cap: PGIM Jennison - 10%
    Bonds: SEI Core Fixed - 10%

    Does this make more sense over the target date fund? Overall seems that expense ratios will be lower, though I am very new to this.

    Thanks for the help!

  • #2
    Is this your only retirement plan? Do you have a Roth IRA? If you do, the ERs for the small caps stink. I'd put your small cap in a good, low ER fund in your Roth IRA. Or I'd consider not going with small caps just due to that ER above. The mid cap you chose is a good one and actually will give you some small cap exposure.

    Otherwise I think what you selected is fine. But you want your AA to reflect all of your retirement accounts, not just the 401k. Unless the 401k is all you have (including a taxable account meant for retirement) then we need more information from you


    • #3
      Looks fine overall.

      If I had to nitpick, a bit heavy on the Extended Market though (which also includes small-cap, just FYI, as well as some large). Might look for better small cap options elsewhere as well (e.g., Roth IRA), as mentioned above.

      And you're young and looking to get on that early FI track--ditch the bonds (especially at 0.40% ER).


      • #4
        Good point, thanks for the response. On top of max 401K contributions, I plan on maxing out back door roth yearly, though don't have this in place yet. I'll also open up a taxable to put an additional 20K per year to hit ~20% savings. I currently have ~20K in a roth IRA @ TIAA from residency. That is currently in a T Rowe Target date 2055 fund though plan on reallocating. Unfortunately no good small cap options here either, there is one from T Rowe Price @ 0.8%. I do have access to a Vanguard Institutional Index Fund Institutional Plus @ 0.02% in this IRA which seems like a better large cap choice. So I guess it makes the most sense to allocate 401K funds between the Vanguard international and midcap funds, and use my IRA accounts for small cap/total market investments.


        • #5
          Wait, where is your Roth IRA? You can just transfer it to Vanguard or Fidelity or Schwab and buy the low-cost small cap index funds there. Whoever you use is also who you should use for your taxable account.


          • #6
            Roth is at TIAA. I didn't realize I could easily transfer it. Will probably open up a Vanguard account soon to to manage all the IRAs and taxable. Thanks!


            • #7
              Get a vanguard account and search for the form to do a Roth IRA to Roth IRA transfer. Before the transfer you probably should just sell all Roth so it’s cash for the transfer. Then buy once transferred