Company 401k Investments through Fidelity

Investing
#1

Hi @Jeremy and everyone else,

I’m starting to get more involved with my current investments and planning for additional investments, and have a few questions.

My 401k through my employer is with Fidelity NetBenefits and I’ve been contributing to it for a few years now. Back when I set it up, I pretty much had no idea what I was doing so I chose an investment with little to no knowledge about it. I’m currently 100% allocated to this: TRP RETIRE 2050 F

  1. Is this considered a target date index fund? I can’t seem to find it labeled anywhere as an index fund but It has a fairly low expense ratio of 0.37%.

  2. My employer matches contributions up to 5%, so should I contribute the same 5% or go higher? And should my contributions be pre-tax, Roth, or after-tax? I was thinking I would match my employer at 5% and put an additional 5% or so in a Roth IRA with a target date index fund.

  3. I have 27 investment options to choose from. Would you recommend sticking with my current investment or change to one/some of the available options?

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Thanks,
Eric :grinning:

#2

Hi Eric.

  1. Youre in a Target Date Fund. I don’t 100% know for sure whethere it’s an index or not. Probably is but it’s a target date for sure. Not worth time stressing over. You know it’s a low expense ratio.

  2. Youll have to do some guessing on what you think tax situation will be in the future when you start withdrawal. You can always do a mix for your 401k and change at any time.

If you go the Roth IRA you can always do pre-tax 401k for a mix to lower your taxable income. The answer really depends on what your taxes look like now and what you think they will be in the future.

Post tax contributions are if you’re a really high earner and plan to go above and beyond the $19,500 contribution limit (which is up to 56k with employer contributions and everything i believe). Which is advanced retiremenr plannign but I can link you to resources if you’d like.

  1. I see some really good investment options with Vanguard index funds, but im also a do-it-yourself investor and play around with analyzing different asset allocations. If you’re not comfortable choosing your own asset allocations stick with the target date fund. If you decide you want to go more aggressive in stocks but stick with a target date, you can always go for one further out than 2050.
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#3

Hi @Jeremy

Just wanted to see if I can also get your thoughts on my questions. Thanks!

#4

@dudemeister7 ,

  1. Probably not, it usually says it if so, but the expense ratio is not horrible.

  2. That works. I would do the Roth IRA.

  3. As @Chadmethner says, you have good Vanguard funds in there. It is a little more “active” but you could spread across the Institutional, Mid, Small, International, and Bond funds to get a lower exp ratio and more customization. But your current one is not a bad option and benefits from simplicity!

Cheers!

PS: If you will allow me to suggest something - a savings rate of 10% gets you to FI in 50+ years (see calculator below). I would focus on hitting a higher savings rate before optimizing investment options - the diff of 401k vs. IRA, pretax vs. post tax will not matter as much as bumping up savings rate by 5 or 10 or 20%. Play with this calculator, set your goal savings rate, then increase your income and decrease your expenses until you get there. THEN circle back and optimize investments…
http://networthify.com/calculator/earlyretirement?income=50000&initialBalance=0&expenses=20000&annualPct=5&withdrawalRate=4

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