Hello Jeremy! I am a 28yo female who has Fidelity through my work traditional 401k. I put in about 6% of my salary per month. I have 7-8 months of expenses saved up. I have student loans but am paying it off slowly. I have been following your IG and blog now for approximately two months, and have learned so much. That being said, currently I have my account managed at Fidelity for a half percent fee as I did not feel comfortable investing on my own (I know, dumb move). I am invested in some index funds (FID500 index and fid global ex US index) but also some other funds with high expense ratios. My question is two parts- 1. Do I sell all my stocks at once and then put them into my target FDEWX (2055) all at once? and 2. How to you feel about 70% of the money going into a target date fund and 30% into FZROX?
I also do not understand the difference between FZROX and FSKAX.
I really appreciate your help in advance.
Pay them off fast! Is that money in Fidelity in a regular taxable account? What are the numbers? How much debt? How much in Fidelity?
Probably. I would at least want to look at any “unrealized gains”. i.e. if you do that and this account is a taxable account, it could have a tax implication. If we’re talking about small numbers, who cares, just go for it. If we’re talking about big numbers it’s worth running by a CPA.
I have no problem with that, but everything inside of FZROX is already inside of FDEWX. So you’re just overweighting US stock more than the designers of the asset allocation for FDEWX think you should. In metaphor terms it’s like asking “Should I buy neapolitan ice cream and chocolate ice cream?” You could. It’s all good. But you might end up with too much chocolate, relatively speaking.
They’re functionally identical. They’re both total US stock market index funds. They both (basically) contain the exact same stocks. FSKAX has just been around longer and has a very very low expense ratio (0.015%). Then like a year ago, Fidelity is like “Whatever. The expenses are so low at this point, let’s just make one that is actually 0.0% expense ratio funds so we can brag about it in our marketing”. That’s when FZROX was invented. (Get get it? ZRO?) But 0.015% is so close to 0.0% that it barely makes a difference. I think FSKAX has a few more companies at this point and pays dividends semi-annually whereas FZROX pays them annually. But these are academic differences. They both will make you the same amount of rich. Might as well go with FZROX.
Jeremy, thank you for the reply!
I have 12K in my traditional 401K with Fidelity. I have 200K in student debt- I went to an expensive private university to get my masters and unfortunately made bad decisions when I took out loans. Yes my goal is to pay them off quickly- to me that is looking at 10-12 years as I unfortunately cannot make any further payments on my loans. I could pay less into my 401 but also want to invest in that account as well. I own a home on which I have 390k left (Living in high COL area in CA). I do have 2 roommates who help with my mortage.
Would you recommend only moving some of the money out and leaving the money I have in the Fidelity index funds? By tax implications you mean I would owe taxes on the amount of money I have gained correct?
Is that 401k your current employer? Is that the investment account you’re talking about?
yes with my current employer. they also stated the half percent management fee is discounted for our group for some reason so thats why I started out with it being a managed account. I work for a hospital. I have had my account for 1 year and 3 months. Meeting the 4% match and more ( I put 6% in)
Ah, ok! So since it’s your current employer’s 401k, you can’t actually roll it over to an IRA, and you also can’t pick from any investments. You basically just get to choose from the options they give you. But the good news is that since it’s in a tax-advantaged account, you can sell/trade to your little heart’s content and that won’t be a taxable event.
SO: If it were me, I’d look at the other options without the advisor fee. If they offer a target date index fund (similar to FDEWX) or low/no fee index funds (like FZROX and FSKAX) then I would switch everything you have (existing investments and future contributions) to the low fee index funds.
Thank you so much! I will look into this!