401k
401k Information

401k Asset Allocation

When you begin contributing a 401K in the early years of your working life, you are saving for your ultimate exit from the workforce. Along the way, things happen 00004000 that can put a glitch in those plans. Should that occur, and you begin to contemplate withdrawal of the hard earned money that you tucked away, look past your immediate need and look at the consequences that your decision can make on your future. The obvious, of course, is that you will have just that amount less for your golden years. The other, not so obvious is the IRS.

401Ks, ESOPs, TRESOPs, or whatever name they are called by your employer, refers to tax deferred ventures in which every dollar put into the vehicle is one less dollar available for Uncle Sam to tax you on. Sound good? Of course it is. The problem arises when you withdraw tax free money, it then becomes taxable. Now most everyone is aware (knows and understands) this part. The part that eludes everyone is that there is also a ten percent penalty charged in addition to your tax for the year. If you withdraw a significant amount, your tax and penalty can and will be significant. This does not pose a problem when the individual prudently planned for the tax and penalty in advance (in addition to having federal income tax withholding at a rate of 20 %, they changed their withholding on their Form W4 to cover any shortfall that might arise) to have it properly deducted from the proceeds and sent to IRS. If you didn’t, when you see the amount that you owe, or the reduced refund, you’ll wish you had.

Fortunately, the tax law built into the equation exceptions to the additional 10% penalty. (Of course, not the tax; you’re on your own with respect to that). In the event that you withdrew a significant amount of money, say ,000, a steep penalty of ,000 on top of what you would already owe is enough to give you a headache. But if you did not have to pay the full ,000, say ,500, is still bad but better than the full amount. These exceptions state that if you had a good reason, which is any of the reasons listed below that you used all or a portion of the proceeds for, then you will not have to pay the additional 10 percent penalty. Outstanding! Here are the exceptions:

1. If you retired and withdrew the funds in a lump sum at or after age 55.

2. If you retire and opt to receive the funds in a series of payments (annuity) made over your life expectancy or that of your beneficiary.

3. If you receive the funds as a result of your becoming permanently and totally disabled.

4. The funds were received as a result of your death.

5. If the funds were withdrawn and used to pay unreimbursed medical expenses subject to 7.5 % of your adjusted gross income. The balance would be subject to the 10% penalty.

6. If the funds were withdrawn due to a qualified domestic relations order (For example, a divorce decree that specifies that one party be paid a portion of the proceeds of the 401K)

7. If the IRS places a levy on the funds.

It will be up to you to identify on your Form 5329, Part 1, Lines 2 and 3, the amount that is not subject to the additional 10 % penalty, which is line 2 and on line 3, to correctly identify the exception that applies to you (Found in the Form 5329 instructions, page 3). Should you find at a later point in time that you paid the additional tax and you qualified for an exception, obtain Form 1040X, US Individual Amended Return and Form 5329 for the year in question.

You can find all the forms and instructions listed above at the IRS website, www.irs.gov or you may order them by phone by calling 1-800-829-3676.

Frequently Asked Questions

  1. QUESTION:
    401K asset allocation… ?
    As a protective measure, I am moving my Funds to the conservative approach and moving 75% into the funds that consist primarily of bonds, and using 25% so I can keep tabs on the stock. Is this a good strategy for this kind of economy?
    I have tried to do what you say, but continually lose money, I just made the change. A guaranteed strategy is to do nothing. The method of buying low and selling high does not apply at this point because there is no finite amounts of how low they will go, just when you think they will make a comeback, they drop immensely and boom one thousand dollars is lost in a matter of days.

    • ANSWER:
      Buy stocks now! They are cheap. This market is driven fears and fundamentals are thrown out of the window.

  2. QUESTION:
    What is the best asset allocation for someone in their first 401K?
    Target 2050? Other?

    • ANSWER:
      There is no “best allocation”. All 401k plans are different in what you are even allowed to invest in. Some have a ton of fund choices, some only have a few, some have well balanced and blended investment options, etc.

      However diversity is the key. Never have all of your money in a single fund. Make sure you have some in stock funds and bond funds, perhaps even a commodities/precious metals fund if one is available. It is also wise to invest in some domestic funds AND some international funds. Also the younger you are you may be better off with more high yield funds and as you get older and closer to retirement move more toward investing in more stable income type funds.

      Since I assume you are younger, I would start out by picking 1 Blended Choice fund such as the Target 2050 you mentioned, 1 International Stock fund, 1, Emerging markets Fund, 1 Large Cap, and 1 Small Cap fund. Divide your contributions between them at 20% each until you build them all to a fairly sizable amount. Then stop contributing to those and pick new ones to build up until you have about 15 or so different funds total in your portfolio. IF your plan has a Fund that exclusively trades your company stock and/or a Precious Metals fund then lower the contribution amount in the small and large cap funds to add these.

      EDIT: I just clicked on your profile and see you have a mutual fund investment blog and in fact have already written an article explaining what I just said above. So I am not really sure why you are asking this question since you seem to know quite a bit about investing already…especially in mutual funds. Anyway hopefully this will help others out.

  3. QUESTION:
    I can not find definitions for terminology associated with 401k plans, the terms are asset allocation sign up?
    i need to define-asset allocation sign up sheet, stock indexed funds, equity index option, managed equity funds, front-end load, back-end load, defered sales charge, self directed funds, portable funds, & vested balance

    • ANSWER:
      he wants definition,not reccomendations

      www.investopedia.com or www.wikipedia.org both work well for that type of stuff

  4. QUESTION:
    what is a asset allocation sign-upsheet for a 401k?

    • ANSWER:
      When you open a 401k account, you are given a choice of types of investments (e.g., guaranteed interest, high-risk stock, mutual funds, etc.). You need to indicate what percentage of your investment amount and future deposits you want to go into which categories. This is the use of the allocation sheet.

  5. QUESTION:
    What are good allocation percentages for a young person’s 401k?
    I’m 23, and unsure of where to put my 401k money.

    What percentages should I put into the various types of funds (i.e. Large-Cap Growth, Small-Cap Growth, Large-Cap Value, International funds, bonds, stable value, etc.)?

    A co-worker who is a somewhat experienced investor suggets 50% Large-Cap Growth, 25% in the Vanguard 500, and 25% in stable value. That seems a bit conservative to me, considering my youth.

    What asset allocation percentages would YOU suggest? And why?

    • ANSWER:
      25% in the stable value fund is ridiculous. anyone with that under 50 reallly does not understand investing at all. Large cap growth basically the same as Vanguard 500 (assuming that is S&P500) so duplication. 25% small cap. 25% International 25% Large cap value + 25% Vanguard 500. Still a bit too conservative but much better than his. He has no positive experience at all. Feel free to contact me with exact funds info you have if you want. You NEVER put municipals in a tax free acct(401)as they are already tax free & priced for that. Ignore that in above answer. Can’t just make up numbers or copy them from some source.

  6. QUESTION:
    Asset allocation and am I putting the right funds in my IRA/401K with the right amounts of stock and bonds?
    My husband’s 401K is at Fidelity and it is 100% Fidelity Freedom fund. There is not much to chose from and the exp ratios are high. The freedom fund is .81%. His IRA is at Vanguard and he has the Total Stock Market, Total Intl Stock Market, Total Bond, Wellesley and Wellington. I want to get rid of the Wellesley/Wellington because their stock holdings overlap the Total Stock Market and just have the 3 funds (total stock, total intl and total bond) what do you think? Last question about my Trad IRA and Roth – should I rollover the traditional IRA to my Roth. The traditional only has 10,000 or should I just have two IRA’s?
    What Vanguard funds do you recommend for a “Bear Market”

    • ANSWER:
      You may just want to put all your money in a Vanguard Target Retirement fund. It is invested in foreign and domestic stocks as well as bonds, and automatically readjusts more into bonds as you get older. See link 1.

      To determine if your stock/bond asset allocation is appropriate, you might want to try the Vanguard quiz. It depends on your age and other factors. See link 2.

      However, the 401k at Fidelity is more complicated, as I don’t know what funds at Fidelity you can invest in. Some of their Spartan and Index Funds have low expenses.

  7. QUESTION:
    Can changing asset allocations in 401K result in tax credit/deduction?
    I changed some of my asset allocations of my 401K this last year, which resulted in my selling of some stocks and buying others. Because of the situation of the economy, I took some losses when I sold the stocks as I sold them for less then what I bought them for in the first place. My question is, is the amount I lost tax deductible? If so, how do you figure out how much it is that I lost exactly?

    Thanks for your help.
    Thanks – You were all very helpful in answering my question.

    • ANSWER:
      No. Transactions inside your 401k have no tax consequences. Only money going in or out has a bearing on your taxes.

  8. QUESTION:
    Does my current retirement asset allocation seem appropriate?
    k all of it in mutual funds. Split between three 401k’s and one Roth IRA.
    64% international
    28% large growth
    7% Fidelity Freedom Fund (FFFHX)

    I am a 40 yr old soon to be married, no kids, at least not yet. Willing to take on a little extra risk in an effort build more wealth.

    • ANSWER:
      I’m a portfolio manager, and my opinion is that your portfolio is pretty risky. For an aggressive growth objective I would consider about 15% small cap, 15% international, 50% domestic large cap, and 20% in a taxable bond fund. For the large cap I would strongly consider using an S&P 500 Index fund.

      Vanguard offers a number of good low-cost, no-load mutual funds that would work very well for an investor in your situation. Of course you may not have that flexibility in a 401(k) plan.

  9. QUESTION:
    Asset Allocation for my 80 year old Mother?
    My heathy mother has no debt, lives on SS and small distribution payments from a 401k. She has a 0,000 that she would like to invest with the intent of never needing the cash. She makes so little that she pays no tax. Here is what I was thinking, tell me what you think of this allocation. 20% WYASX, 20% OAKBX, 20% PIBSX, 20% MBDFX, 20% Money Market. I appreciate your honesty and advice.

    • ANSWER:
      I would be more diversified and work toward a long term goal if this is going to be strictly for inheritance. There is no better professional than a financial adviser to give you guidance. There are so many trends and undercurrents that the average investor would never know about. You may want to check out a bank like ING. They have lots of ideas for older investors. For instance, in some cultures the women live to their mid 90′s. We are talking about 15 years of additional expenses. Take a look at long term care insurance unless your family is set up to care for an elderly person. Even a healthy woman can take a fall and have hip surgery that goes very bad. Before you invest, contact a local agency on aging and make an effort to attend any workshops they offer for families and caregivers. You don’t have to reinvent the wheel, and you can learn some tried and true principles. Best of luck to the both of you!

  10. QUESTION:
    Asset Allocation for best tax efficiency?
    I’m trying to rebalance my portfolio, taking full advantage of tax-sheltered accounts (401k, IRA, 529, etc).

    I’ve heard conflicting views on which assets are more tax favored. Could you please rank the tax favorability of the following classes?

    Domestic Large-cap equity
    Domestic Mid/Small-cap equity
    International/Emerging Markets equity
    Fixed Income/MM
    Real Estate

    Thank you!

    • ANSWER:
      maybe i am missing something but since these are in a pre tax fund it does not really matter == you will not be taxed until the money is withdrawn!!!

  11. QUESTION:
    Should I use the 401k model portfolio that Fidelity suggests?
    Fidelity has a 401k tool that creates a model portfolio based on your situation, asset allocation, etc. It’s very personalized based on several different factors. My only concern is that the model suggests I invest in about 10-12 different funds available to me (ranging from 2%-12%). As a little background, I’m 22 years old and have just recently started investing in my 401k. Should I go with the model?

    • ANSWER:

  12. QUESTION:
    Can someone steer me in the right direction with my 401k and investing in stocks?!?
    I just got my 401K info in the mail for my total asset allocation and balance by investment. I have 92% of short term investments and then 0% in stock investments. Im interested in investing in stocks. I have ,469 in there. Im only 21 so thats why im clueless with how to be smart/what to do. Soo yeah, Help :D thanks!

    • ANSWER:
      In most 401′s you won’t be able to choose individual stocks….you’ll be given a choice of ” mutual funds”…..if they offer ” life – cycle funds ” ( those with years in their names 2020, 2050 etc ) take the highest year thay offer for about 75% ….then go with 25% in something with foreign market exposure. You’ll be aggressive for years to come and in tune with the changing world markets also.

  13. QUESTION:
    How should I allocate ING 401k?
    I’m 24 years old and work as an IT Consultant. My firm has a 401k plan with matching with ING. My company matches half of my contribution, up to 3% of my salary. Therefore, I am planning on contributing 7% to take advantage of the match. My question is, how do I allocate my contribution? ING offers a variety of funds and labels them as Global/International, Aggressive Growth, Growth, Growth & Income (Stocks), Growth & Income (Stocks & Bonds), Asset Allocation, Income, and Stability of Principal. Since I’m still young, I’m looking for a more aggressive strategy – slightly higher risk but higher estimated return. Any advice in the form of percentages of contribution would be very helpful. Thanks.

    • ANSWER:
      Here is one aggressive asset allocation that I would suggest:
      15% large-cap
      15% mid-cap
      15% small-cap
      10% international
      10% special sector (e.g., healthcare)
      10% fix income (e.g., bonds)
      10% cash

      Here is what I recently read: “The smartest investors concentrate on what makes a difference: asset allocation.” Therefore, no matter how aggressive you are, you should get your asset allocation right and keeping your costs as low as possible.

  14. QUESTION:
    What is the best 401k allocation?
    I’m 22 and just started my first full time job. What is the best mixture of assets to invest in for my 401k when i enroll? What % equities, bonds, etc. % in agressive growth funds?

    Thanks! (any links to pie charts or something would be great!)

    • ANSWER:
      There is no “best” allocation. It depends on your tolerance for risk, your time frame, other investments you may have or may get, etc.

      Being young, you should be aggressive. I’d put very little in bonds because you’re so young and rates are so low. If rates go up (which I feel they will at some point) your investment in bonds will go down. You should probably have a good portion in growth stocks, you should have an international exposure and maybe some income producing stocks. But it all depends on you.

  15. QUESTION:
    What is the best retirement account asset allocation for people in their early 50s?
    My dad, who 50 years old, has only about ,000 in his retirement account. His health is decent right now, and he plans to work until he’s 60 or 65. Unfortunately, the company that he works for has always had an employee match that was only applicable to company stock. As a result, this encouraged employees to put all their eggs in one basket and the company stock has performed terribly for 15 or 20 years. I believe this is just now changing, and with my encouraging, he is going to shift his 401K from company stock into diversified mutual funds now offered by the company through Merrill Lynch.

    I know people who are in their 50s can not be as aggressive as those in their 20s, but it seems that my parents may have some catching up to do. Everyone on my mom’s side lives into their late 80s. So how much should go in equity and how much should go in debt and money markets? Any thoughts are appreciated.

    • ANSWER:
      I think someone in their 50′s can go with a 70/20/10 stocks/bonds/cash allocation. I think your dad still has some time to build a respectable portfolio.

      It’s unfortunate he felt the need to invest in his company’s stock. I once worked for a company that did the match in (mediocre) company stock. My contributions went into Fidelity’s funds.

  16. QUESTION:
    Would you avoid this 401k retirement fund (RAYOX)?
    It’s the asset allocation option in my 401k (the lazy man’s route)..

    From my research so far, it doesn’t look very promising, but who knows?

    • ANSWER:
      I would say yes…avoid it. any fund that has a .5% 12b1 fee shoudl be avoided like the plague. I’d also talk to management about the fund offerings. They went the cheap route and got sold an expensive plan. Certainly the fund is performing ok but at what cost? Asset Allocation funds are generally holding either ISHARES like this one does…or other mutual funds within that mutual fund family. So the cost of running one shouldn’t be that high. Sorry but 1.33% is high!!!

  17. QUESTION:
    401K advice Needed?
    Hello, I’m a 40 year old professional, with a wife and 2 year old son. The early years of my marriage, in particular the desire to keep my wife at home during the first years of our child’s lives, have led us to empty out a 401K from a previous employer. I’m essentially starting over again with my new 401K. I’m also having to think about saving for my children’s college education.

    My current asset allocation in my new 401K is: 20% in an S&P500 index fund, 20% in a small cap growth fund, 20% in a large cap growth fund, 20% in a bond fund, 15% in an asset allocation fund, and 5% in a money market account.

    Can you offer any tips/advice for getting my retirement savings where they need to be? Is my asset allocation strategy appropriate for my age? What % should I be contributing at this point in order to catch up? Thank you for any advice you can give.

    • ANSWER:
      You have an very specific situation that a financial advisor will have to work carefully with you in that your retirement and your son’s college education are so close together.

      As a point of reference as to your portfolio mix for retirement I just looked up the mix for Fidelity Freedom 2035 fund. This fund is designed to rebalance more conservative as the investors reach retirement age – targeted for people retiring in around the year 2035. It is unlikely this single fund is available in your 401K I used them simply as a professionally picked example of a portfolio mix. 66% U.S. equities, 16 % Non- US equities, 10% investment grade bonds, 7.5% High Yeild bonds, and .1% money market/other. (numbers rounded). Your portfolio listed above is actually really close to that already – super! Check to see if the Asset Allocation fund has some foreign exposure. If not, it may just be duplicating some of the other funds and could be changed over.

      Next part is make your retirement budget: Start by figuring between 60 – 80% of your pre-retirement income in order to live in retirement. This income will likely come from 1) Social Security 2) Pensions 3) investment income/ savings and 4) IRA/ 401K proceeds.

      You can request a statement from Social Security that will show your estimated benefit paid to you if you retire at age 65. That can go up if you work longer, and down if you file earlier – anyway, that plus if your wife is eligible for SSI, can be part of your income – if you are starting a new job now, the lieklyhood of a traditional pension is low, and in my opinion, any additional savings will go toward college for the little one.

      So you will need enough in your 401K / IRA vehicles to get you to 60-80% of your pre-retirement income -minus – your expectations from Social Security.

      Once you figure that out, figure that income figure is about 6 percent of the total that should be in that account on retirement day. Divide that by the amount of time you have left, (use a retirement calculator from online that can figure in the growth during your accumulation phase (there is one at Wachovia.com) and there lies the answer to your question above.

  18. QUESTION:
    Is it worth having a guided portfolio services w my 401k??
    Hi,
    I just signed up for my company’s 401k program and the agent adviced me to go ahead and set-up a guided portfolio service that would be done by morningstar. The fee is .60%, is this worth it? I get a 10 day trial and after which I could cancel it and do it on my own. The services state it will do the following: Wealth forecasting, asset allocation, investment selection and asset management. Thanks!
    okay, I’m 33 years old and here is the list of fund:
    AIM small cap growth fund
    AllianceBernstein International Value fund
    American Century Gov. Money Market fund
    American Century Inflation Adj. Bond
    American century ultra
    American Beacon small cap
    Calvert Social investment equity
    DWS Health care
    Dreyfus midcap index
    dreyfus small cap stock index
    JP morgan capital growth
    janus adviser forty
    Janus growth and income
    Munder balanced
    Mutual shares
    Oppenheimer capital appreciation
    pioneer equity income
    putnam global equity
    putnam international
    sunamerica focused balanced strategy portfolio
    sunamerica focused equity strategy portfolio
    TRowe price science and tech
    vanguard 500 index
    vanguard total bond market index
    wells fargo advantage govt. securities

    There you go. Should I go for aggressive or moderate? thanks!

    • ANSWER:
      I’ve been doing my own for 25 years, now. One thing you DON’T do with a 401K is day-trade. Your 401k investments are very long-term. For my portfolio, sometimes it is a couple of years between changes in investments. For example, I moved stock funds to bond funds right after the hi-tech stock bust around 2000 (way before the Dow hit it’s low in the 7000s, and when that all settled out 2 years later, I moved back to stock funds.

      Just get some high growth funds with good long-term track records and you should be fine. If you can maintain 10-13% over the long haul you are doing great. A money manager might be able to get you another 1% on top of that, but if it cost’s you 0.6% is it really worth the extra 0.4%?

      .

  19. QUESTION:
    Where should I put my 401K money?
    Just Starting out in my 401K and wanted some opinions. Options are:

    Asset Allocation: Age Based
    Target 2015 Allocation 9.519
    Target 2025 Allocation 9.440
    Target 2035 Allocation 9.402
    Target 2045 Allocation 9.385

    Asset Allocation: Risk-based
    AXA Moderate Allocation 9.690
    AXA Aggressive Allocation 9.454
    AXA Conservative-Plus Allocation 9.743
    AXA Moderate-Plus Allocation 9.579

    Investment Grade Bonds
    EQ/JPMorgan Core Bond 9.913

    High Yield Bond
    Multimanager High Yield 9.992

    Large Cap Growth
    EQ/T. Rowe Price Growth Stock 9.965
    EQ/Large Cap Growth PLUS 9.778

    Large Cap Blend
    EQ/Davis New York Venture 9.336
    EQ/Equity 500 Index 9.384

    Large Cap Value
    EQ/JPMorgan Value Opportunities 9.066
    EQ/AllianceBernstein Value 8.971

    Mid Cap Growth
    EQ/Van Kampen Mid Cap Growth 10.043

    Mid Cap Blend
    EQ/FI Mid Cap 10.247

    Mid Cap Value
    EQ/Lord Abbett Mid Cap Value 9.626
    EQ/Mid Cap Value PLUS 9.479

    Small Cap Blend
    EQ/Small Company Index 9.879

    Others, but ran out of room. Thanks

    • ANSWER:
      Sit down with a registered financial adviser and the two of you can plot your 401k strategy. Just make sure you interview several candidates and pick a financial adviser you trust and who has a good reputation.

  20. QUESTION:
    Questions about 401K Funds?
    Hi,
    I have to make a choice of contribution to my 401K. I’m very confused about the choices. They are Money Market fund, fixed income fund, general fund, large cap equity fund, small/mid cap equity fund, index fund, international fund, and global tactical asset allocation fund. Those are offered by the company. Can someone give me some recommendations on what those funds are and which one has hight risk or low risk? Thanks you very much.

    • ANSWER:
      These are listed in order of risk from low to high.

      A money market fund invests in short term commercial paper. They are managed to keep a steady net asset value of per share (although that’s not guaranteed). It carries the least amount of risk but provides the lowest long term potential return.

      A fixed income fund invests in bonds. You’ll have to check the fund prospectus to find out what types of bonds. This is also relatively safe and has relatively low long term potential returns.

      A large cap equity fund invests in large cap stocks (that is, very large companies). The index fund probably refers to the S&P 500 index. Check your prospectus to be sure. If so, this is also a large cap stock fund except that it tracks companies in the S&P 500 index rather than relying on a manager to select the investments.

      A small/mid cap equity fund invests in the stocks of smaller companies.

      International and global funds invests in the stocks of companies on other countries. Global funds could also own some US stocks.

      I have no idea what you mean by a “general fund”. I’ve been investing for 20+ years and have never heard of this.

      Risk is proportional to potential return. You don’t have to take extreme risks to do well, but not taking enough risk means that you won’t earn much in the long run. One possibility is to diversify risk by spreading your money over multiple choices. An example would be to put some into the large cap or index fund, some into the small/midcap fund, and some into the international fund.

  21. QUESTION:
    new 401k plan. i have questions?
    ok so i know squat about 401k but i have a new plan thru employer and just recieved my first quarterly statement. it makes no sense to me as i really am ignorant to financial and investment matters. based on the following info can someone please tell me if there are changes that should be made as to where i should be putting my money.

    current assest mix of account balance
    balance —-% assets—- assest class
    0.00 —-0% —-short term income
    0.00—-0% —-fixed income
    643.98—- 100%—- balanced/asset allocation
    0—-0—- large us equity
    0—-0—-small/mid us equity
    0 —-0—-international equity

    assest class
    balanced/asset allocation employer 100% elect deferral 100%
    fees 0
    gains/loss -2.52
    personalized rate of return -0.68%
    contribution made by me 587.71 employer 58.78
    does it seem like i filled papers out right or perhaps wrong? like i said i don’t know squat so i filled in the blanks blinded.
    i also want to have more taken from my checks

    • ANSWER:
      The balanced account it’s in now is probably the best place to leave it until you learn more about how to handle it.

      If you want to be very aggressive with it, i.e. take a lot of risk to in order to potentially make a higher return, put it in the small/mid US equity and International categories. If you want to be very conservative, i.e. take less risk and settle for smaller returns, put it in the short term and fixed income categories.

  22. QUESTION:
    Signing up for my 401k and I’m extremely confused. Can you help?
    They’re asking me a 1–30% deferral rate, all these types of choices such as Stability of principal, bonds, asset allocation, etc…I don’t know what ANY of it means and I have to sign up for it within the next 24 hrs. Can anybody help me?

    • ANSWER:
      I’d strongly advise you to educate yourself more in the long term. There are a number of free educational resources on the Internet: try Morningstar.com and MotleyFool.com

      But since you have only 24 hours: If they have a target retirement date fund series, pick the one with the date closest to your retirement date and put 100% of your money into that. It will be an acceptable compromise one-stop-shopping kind of choice. (And promise to educate yourself so you can make more informed choices later.) If they don’t, then try an ‘Aggressive’ asset allocation if you’re under 35 and ‘Moderate’ between 35 and 50.

      As for the deferral rate: first, if the company matches anything, you REALLY have to defer enough to get the MAXIMUM company match. But even if you don’t get a company match, put away as much as you can afford. It’ll grow tax-deferred up until retirement, which is a great gift from the government to you.

  23. QUESTION:
    Investing in a Bear market… Putnam 401k choices ?
    401K Advice … I’m 27 years old and I want to know if I’m heading in the right direction.

    My company’s 401K is a Putnam Account.
    Not the greatest. I recently made some changes and I would like to know if anyone out there has experience or advice for me on my choices. I’m definitely a novice when it comes to my investments.

    I contribute approx 0 per month to my 401k
    ( My company matches 5% of my contribution on a vesting schedule –
    I’m currently 40% vested)
    Its not a lot of money, but it’s better than nothing!

    I just changed my distribution to 20% allocation to each of the following :

    FEES: Annual Gross Expense Ratio – % (AGER)

    PABGX T Rowe Price Blue chip Growth (A.G.E.R. 0.95% )

    RGACX Growth Fund of America (A.G.E.R. 0.96%)

    (No Symbol ? ) Putnam S&P 500 Index Fund (A.G.E.R. 0.35%)

    ACGIX Van Camp Growth & Income (A.G.E.R. 0.77%)

    PDDXX Putnam Money Market Fund (A.G.E.R. 0.54%)

    I also have approx 5k in PABAX Putnam Asset Allocation Balanced (AGER 1.09%) &
    I have about 1700 in PAEAX Putnam Asset Allocation Growth (AGER 1.16%)

    If you have suggestions… I would really appreciate knowing why I should change or remain the same!

    Thank you for viewing my question!

    My other options thru my co. sponsored plan are : PACAX/1.18% PNOPX/1.17% GTSAX/1.23% PVOYX/1.14% DSEFX/1.24% POVSX/1.25% SRVEX/1.04% LSBAX/1.36% PNRAX/1.25% PCOAX/1.23% LAVLX/1.10% PEYAX/1.11% PGEOX/0.98% PNGAX/1.35% LAFFX/0.81% PMVAX/1.23% PTRAX/0.68% PAGVX/1.13% PINCX/1.07%
    for “Bonsai” What should I look at when choosing? I based my choices off my expense ratio, 5 year perfomance and whether or not I was buying near the 52 week low

    • ANSWER:

  24. QUESTION:
    Is this a terrible choice? 401k putnam investing ?
    My company’s 401K is a Putnam Account.
    Not the greatest. I recently made some changes and I would like to know if anyone out there has experience or advice for me on my choices. I’m definitely a novice when it comes to my investments.

    I contribute approx 0 per month to my 401k
    (not a lot of money, but it’s better than nothing!)

    I just changed my distribution to 20% allocation to each of the following :

    PABGX T Rowe Price Blue chip Growth ( Annual Gross Expense Ratio 0.95% )

    RGACX Growth Fund of America (A.G.E.R. 0.96%)

    (No Symbol ? ) Putnam S&P 500 Index Fund (A.G.E.R. 0.35%)

    ACGIX Van Camp Growth & Income (A.G.E.R. 0.77%)

    PDDXX Putnam Money Market Fund (A.G.E.R. 0.54%)

    I also have approx 5k in PABAX Putnam Asset Allocation Balanced (AGER 1.09%) &
    I have about 1700 in PAEAX Putnam Asset Allocation Growth (AGER 1.16%)

    If you have suggestions… I would really appreciate knowing why I should change or remain the same!

    Thank you for viewing my ques
    I forgot to mention that I’m 27 yrs old
    bacause of the “BEAR” market… wouldn’t it be buying high to go to an international market? the only option with my plan is POVSX (expense ration 1.25% Putnam international equity

    • ANSWER:
      I do have just one suggestion. That is to replace some of the growth funds with small cap and mid cap. You are way over allocated to large cap growth. Both PABGX and RGACX have very close to the same holdings. RGACX has by far the better record.

  25. QUESTION:
    My 401k is -52.52% What should I do?
    Should I change my investment portfolio? right now I have a 100% in the Principal LifeTime 2040 Separate Account. The YTD change is -43.08. The Last 3 mo’s -27.31, 1yr -39.25, 3yr -6.02, 5yr .57

    I know that I was told to not even look at my 401k because I am only 30 and it will go up and down, -52% is a lot of damn money i’ve lost.

    Investment strategy: The investment seeks a total return consisting of long-term growth of capital and current income. The fund invests in underlying Principal domestic and foreign equity, hybrid, and fixed-income funds according to an asset allocation strategy designed for investors having an investment time horizon comparable to that of the fund. It allocates the assets more conservatively over time. The fund may invest in any of the Institutional Class shares of the equity funds or fixed-income funds of Principal Funds, at the sub-advisors discretion
    rincipal Disc LargeCap Blend Inst — —13.04
    Principal International Growth Inst — —10.46
    Principal International I Inst — —8.77
    Principal LargeCap Growth I Inst — —7.37
    Principal LargeCap Blend I Inst — —6.83

    Principal LargeCap Growth Inst — —6.77
    Principal Bond & Mtg Securities Inst — —5.71
    Principal High Yield I Inst — —5.54
    Principal LargeCap Value Inst — —4.59
    Principal LargeCap Value I Inst — —4.45
    The reason that I have 100% in the fund is because I was told that the fund is diversified in itself. Meaning that it invests in a mixture of aggressive and conservative investments. Is this not true?
    I also thought about leaving it in this fund hoping that it will bounce back, but if you look at its history it shows losing money for the last 3 years.

    • ANSWER:
      Stock markets around the world are down 40% to 50% or more. Anybody who holds shares is likely to be affected. Remember, until you sell you have not really lost anything.

      Some people see the down turn as an opportunity to buy. Others see it as an opportunity to sell, harvest a loss and then rebuy at a lower cost. This way they still hold the same number of shares in the company but now at a reduced cost per share and the loss is offset against other taxable income earned. This is a means of reducing one’s tax bill in the current income year.

      Investing in the stock market is generally a longer term situation. There is emperical evidence to show that over a period of ten to fifteen years or more, the investor who buys and holds for the longer duration will do better than the person you constantly buys and sells over the same period.

  26. QUESTION:
    How should I allocate my 401k?
    23 years to retirement. I consider my risk tolerance moderate. These are my 401k options:
    SPECIALTY
    IARAX AIM REal Estate–loads
    HBGHX Hartford Global Health HLS–no load
    IGNYX Ivy Global Natural Resources–no load
    MURRX MFS Utilities–no load

    INTERNATIONAL
    AWPAX AllianceBernstein Inl Grw–loads
    RERCX AF EuroPacific Grth–no load
    TEDMX Templeton DevMktTrust–loads

    SMALL CAP
    LSBAX Lord Abbett SC Blend–loads

    MID CAP
    GCMAX Goldman Sachs MidCap–loads
    THCRX Thornburg Core Growth–no load
    SSVSX Victory Special Value–loads

    LARGE CAP
    RAFCX AF AMCAP–no load
    NYVTX Davis NY VEnture–loads
    EHSTX Eaton Vance LC Value–loads
    JARTX Janus Advisor Forty–no load

    ASSET ALLOCATION/BALANCED
    RAYOX LifePath2030
    IUAAX Van Kampen Equity

    BOND
    Hartford Total Return Bond HLS
    Pioneer Strategic Inc PSRAX

    STABLE VALUE/MONEY MARKET
    SEI STable Asset

    Should I put most in the SEI Stable Asset to protect the money? Its 10 year average total return is only 3.41%
    These are my ONLY options in the 401k.

    • ANSWER:
      You are facing one of the reoccurring problems with 401k account–a lack of suitable choices.

      AWPAX is not a bad choice and neither is RERCX. Either would be ok for about 25% of your allocation. The 1st is more risky than the 2nd. Might consider a 50-50 split for the 25%

      The large cap should be your core holding although I am not particularly excited about the offerings.

      EHSTX maybe 25 to 50%.

      JARTX is somewhat risky in my opinion but it does have a decent record. Maybe 20% if you do not mind the potential risk. I certainly would not consider more than 20%.

      Although RAFCX does not have a better than average record, it is worth consideration

      LSBAX 15% not a bad choice

      The midcap choices are not too my liking although Moringstar rates SSVSX as 4 star. It ytd performance is very poor. Maybe it is a bargain now. I don’t know.

      THCRX is sort of in the same boat but its ytd performance is even worse.

      I don’t know what to tell you on these. I would avoid them for now and allocat the rest of the portfolio into the money market for lack of a better choice.

  27. QUESTION:
    What should I do with my 401k?
    I’m 24yrs old, I’m out of debt and I put almost 40% of my 45 – 50K/yr paycheck into 401k, money markets and an IRA. I’ve copied and pasted a breakdown of the different categories that I can put my 401K funds into. Right now I have it all in Balanced/Assest Location. I’ve currently lost 28%. I’m not really worried about that (even though I’d like to limit my losses as much as possible) cause I know I have a long way to retirement. Which of these options or maybe a combination will be the best choice for todays economy. Thanks for your help.

    Asset Class Descriptions
    Many plan participants mix and match investments from different categories to help them diversify their retirement savings:

    Short-Term Fixed Income
    These types of investments include any investments that can be quickly turned into cash without losing much value. They may include investment options such as Treasury bills, Certificates of Deposit (CDs), commercial paper and money market instruments. They are considered to be among the least risky forms of investments. However, they are more likely to have a lower rate of return than stocks or bonds over long periods of time.

    Fixed Income
    These types of investments are loans to a company or a government entity. They generally carry more risk than cash equivalents, but less than stocks. Their values can go up and down, though usually not as much as stocks.

    Balanced/Asset Allocation
    These types of investments will generally hold a combination of Fixed Income and Equity investments.

    Large U.S. Equity
    These types of investments include shares of ownership in companies. They generally carry more risk than other investments and have the potential for higher returns. They may be a good choice to help your contributions grow if your retirement is years away. Investments in U.S. companies with large market capitalization.

    Small/Mid U.S. Equity
    These types of investments include shares of ownership in companies. They generally carry more risk than other U.S. equity investments and have the potential for higher returns. They may be a good choice to help your contributions grow if your retirement is years away. Investments in U.S. companies with small market capitalization.

    International Equity
    These types of investments include shares of ownership in companies. They generally carry more risk than all U.S. equity investments and have the potential for higher returns. They may be a good choice to help your contributions grow if your retirement is years away. Investments in businesses with their principal place of business or principal office outside the United States.

    Now that you have an understanding of the basic investment types, select Investment Performance to access details about the investment options available in each category.

    • ANSWER:
      The 28% you are down, is that from the peak of the market?? Or is that year to date? I ask, because the 28% decline seems very steep for an asset allocation fund. My balanced fund is down just over 7 percent ytd.

      Do your asset allocation plan 1st. After that, you can pick your funds. I’ll attach an asset allocation tool from cnnmoney. But I might go something along the lines of:

      35% large us equity
      15% small/mid us equity
      20% international
      20% fixed income
      10% short term fixed income

  28. QUESTION:
    401a (gov’t 401k) Investment Options, ICMARC, what are my best options for my investment?
    I have a 401k from my employer. I am a government employee. I am 23 yoa. I make a 5% contribution pre-tax from my biweekly pay and my employer matches that 5%. I will increase the amount I contribute as I continue my career and can afford to do so. The plan holder is ICMARC. Here are the following options:

    1) These are all Vantage Trust Options:
    *Stable Value/Money Market Funds
    -Vantage Trust (VT) PLUS
    -VT Cash Management

    *Bond Funds
    -VT Vantagepoint Core Bond Index Class II
    -VT PIMCO Total Return, Class Administrative
    -VT Inflation Protected Securities
    -VT PIMCO High Yield, Class Administrative

    *Balanced/Asset Allocation Funds
    -VT Milestone Retirement Income
    -VT Milestone 2010-2045 (5 year increment options)
    -VT Model Portfolio Savings Oriented
    -VT Model Portfolio Conservative Growth
    -VT Model Portfolio Traditional Growth
    -VT Model Portfolio Long-term Growth
    -VT Model Portfolio All-Equity Growth
    -VT Fidelity Puritan

    *U.S. Stock Funds
    -VT Vantagepoint Equity Income Fund
    -VT Eaton Vance Large Cap Value, Class A
    -VT Allianz NFJ Dividend Value, Class Admin.
    -VT Vantagepoint 500 Stock Index, Class II
    -VT Vantagepoint Growth and Income
    -VT Vantagepoint Broad Market Index, Class II
    -VT BlackRock Large Cap Core Retirement, Class K
    -VT Legg Mason Value Trust, Class FI
    -VT Vntageoint Growth Fund
    -VT Fidelity Contrafund
    -VT Calvert Social Investment Fund Equity Portfolio, Class A
    -VT T.Rowe Price Growth Stock Fund, Class Advisor
    -VT Vantagepoint Select Value
    -VT Columbia Mid Cap Value, Class Z
    -VT Vantagepoint Mid/Small Company Index, Class II
    -VT Royce Premier Fund, Class Service
    -VT Vantagepoint Aggressive Opportunities Fund
    -VT Harbor Mid Cap Growth, Class Admin.
    -VT Rainier Small/Mid Cap Equity Fund
    -VT Vantagepoint Discovery Fund
    -VT T.Rowe Price Small Cap Value Fund, Class Advisor
    -VT Royce Value Plus, Class Service
    -VT Nuveen Real Estate Securities Fund, Class Y

    *International Stock Funds
    -VT Vantagepoint International Fund
    -VT Vantagepoint Overseas Equity Index Fund, Class II
    -VT Fidelity Diversified International Fund

    I know these are a lot of options, but I would like to know the best options to go with to start out. I have many of the same options with my 457 Deferred Compensation Plan from my employer also held thru ICMARC. Once again I am 23 yoa and would like to start off on the right foot.
    I can have my employers 5% contribution placed into 6 different options totaling 100% and I also have 6 options for my contribution totaling 100%.

    • ANSWER:
      You of course have to make your own decision based on your risk tolerance and ability to stick with a plan. If you’re prone to panic if your balance drops a lot during a stock market selloff, then you might want to avoid stock funds since one of the surest ways to do poorly is to panic and sell when the market is way down.

      If you can remember that you are investing for the long term and that stock market ups and downs are normal, then I personally at that age would put most of it into some type of stock fund since stocks historically have outperformed all other asset classes over long periods of time. If I were that young, what I would do is put something like 15-20% in one of the international funds and split the rest among two or three domestic stock funds. I’d probably put more in small cap funds than large cap funds since small cap stocks on average outperform large cap funds by a small amount.

      To pick which funds, I’d look at the information for each and choose one with low expense ratios and good historical results.

      But let me stress again that if you go with stocks, you do not want to sell when the value of your account has dropped by a lot. If you feel tempted to, go look at what happened between March 2009 (when the market was down big) and spring 2011 when the market had basically doubled from the lows and remind yourself that if you sell low and lock in your losses, you’ll likely miss that big recovery that’s almost sure to follow.

  29. QUESTION:
    Help, young and new to 401k stuff… Don’t know where to start!?
    I’m a 24 year old, first full time job after some internship experience. I’m currently putting in like 10% (with additonal 4% matching from employer) and I’ve got two 401k accounts, one with Fidelity and another with JPMorgan. Fidelity was from previous employer, now rolled over into IRA, fully vested. From my internship, my colleagues told me the benefit of investing early, so I’ve controlled my expenses to be able to save 10%. I’ve got up to about 7k from both accounts so far. But aside from basic asset allocation, I don’t think know where to begin as far as taking active role in my investments. Where do I begin? What do I do? Where can I read up?

    • ANSWER:
      One nice thing about long term retirement saving you do not “need” to take an active role in managing that investment. The long term aspect reduces risk, almost eliminates short term risk, as averages returns over decades.

      To start, in the K.I.S.S attitude, Keep It Simple Stupid, I really like the target retirement funds that many plans offer and they do your balancing for you and get slightly more conservative every year.

      Other balanced funds will also do your balancing for you without the target age function that increases bonds by about 1% a year. Personally I am more aggressive than the target funds. But you can pick an age further out that has a higher stock component to start. Or shift along the way.

      But I also reduce stocks at the highs and increase them at the lows for a little timing (Kentucky windage one person calls it). But it was many many years of learning before I felt comfortable doing that other than being able to see the extremes like over priced internet bubble or the market hitting new highs a couple of years ago while the banks were in serious trouble.

      I would suggest if your taxable income is low you should reduce you savings in the 401(k) to the maximum match 4% and invest the other 6% on a taxable basis. The reason being you have to pay taxes sometime and the assumption on deferred taxation assumes you will be in a lower tax bracket in retirement than you are now. That is generally not true starting out. Increase retirement savings later when in a higher tax bracket when older and you will get a bigger benefit.

      Also it will be easier to do that if you have taxable saving outside the plan. But that is assuming you will do that and not spend the money.

      I also suggest starting out with some taxable investments that pay a high yield that you have paid to you and SPEND that. That is to reward you for saving and help teach you, reinforce the concept that there is a reward for saving. And that money starts out small and builds so it also teaches that getting rich takes time and a long term viewpoint.

      Good Luck.

  30. QUESTION:
    Help please, explain how to divy up my 401k?
    I am 23. I work for Bank of New York Mellon and hope to work up in the company. I have a 401k that I currently contribute about 00 a year to. I would like to retire at about 60. I have to choose a percentage for each of the following. i.e. The total of these percentages will equal 100% of the 401k.

    Daily Liquidity Money Market Fund
    Mellon Stable Value Fund, Class Z
    Daily Liquidity Aggregate Bond Index Fund
    Daily Liquidity Asset Allocation Fund
    Daily Liquidity Stock Index Fund
    Daily Liquidity Small Cap Stock Index Fund
    DL International Stock Index Fund
    Bank of New York Mellon Stock

    Thanks!

    • ANSWER:
      These fund names do not do much to describe their objectives except for the money market fund and these 3:

      Daily Liquidity Stock Index Fund
      Daily Liquidity Small Cap Stock Index Fund
      DL International Stock Index Fund

      If it were me I would probably divide up my money between those 3 as follows:

      Daily Liquidity Stock Index Fund 50%
      Daily Liquidity Small Cap Stock Index Fund 30%
      DL International Stock Index Fund 20%

  31. QUESTION:
    How should I allocate my new 401k?
    I’m 22, and the company I work for offers a 401k plan with 50% match. I’m new to all of this and have been doing some research on my options. I don’t plan on withdrawing anything from it for a long time.

    Any professional/experienced help would be greatly appreciated.

    Below are funds I have to choose from:

    SHORT-TERM RESERVES
    Vanguard Prime Money Mkt Fund
    Vanguard Retire Savings Trust IV

    BOND FUNDS
    Vanguard Total Bond Mkt Index Inv

    BALANCED FUNDS (STOCKS & BONDS)
    Vanguard Asset Allocation Fund Inv
    Vanguard Convertible Securities
    Vanguard Target Retirement Income
    Vanguard Target Retirement 2015
    Vanguard Target Retirement 2025
    Vanguard Target Retirement 2035
    Vanguard Target Retirement 2045

    DOMESTIC STOCK FUNDS
    Dodge & Cox Stock
    Vanguard 500 Index Fund Inv
    Vanguard Explorer Fund Investor
    Vanguard Mid-Cap Index Fund Inv
    Vanguard PRIMECAP Fund Investor
    Vanguard Small-Cap Index Fund Inv

    INTERNATIONAL STOCK FUNDS
    Dodge & Cox Intl Stock

    SPECIALTY STOCK FUNDS
    Vanguard REIT Index Fund Inv

    • ANSWER:
      Well you want to do your asset allocation plan 1st. After that, you can pick your funds. I tend to be rather conservative, but I might go something like:
      35% s&p500
      10% mid cap index
      05% small cap index
      20% d&c international
      20% bond index
      10% prime cash

      Or you could take the easy way out & choose the target retirement fund closest to your date. You’ve got some respectable choices here. Morningstar is an excellent place to research funds.

  32. QUESTION:
    which investment for 401k through my work?
    ok here are my choices-
    goldman sachs tollkeeper fund
    goldman sachs concentrated international equity fund
    goldman sachs growth opportunities fund
    goldman sachs capital growth fund
    goldman sachs structured small cap equity fund
    goldman sachs structured large cap value fund
    davis financial fund
    goldman sachs structured us equity fund
    goldman sachs asset allocations equity growth strategy portfolio
    goldman sachs asset allocation growth and income strategy portfolio
    goldman sachs core fixed income fund
    goldman sachs ila prime obligations portfolio service shares

    • ANSWER:
      Do the international equity fund. With the dollar weak, international investments can do well just by benefiting from a strong currency. Also, many other countries benefit from higher commodity prices (inflation), so it will help keep your purchasing power up. Remember, a 401K will be invested over a very long time. The growth internationally long-term is going to be much greater than in the United States.

      All investments will go up and down. This is long-term. Put it away and sleep well. Long-term it will work out!

      Good luck!

  33. QUESTION:
    How should I invest my 401k?
    Im young and dont mind taking some risk!

    Short-Term Fixed Income
    Principal Global Investors
    Money Market Sep Acct A _________%
    Guaranteed Interest Account 3 year _________%
    Fixed Income
    Edge Asset Management, Inc.
    Government & High Quality Bond Sep Acct A _________%
    Spectrum
    Preferred Securities Sep Acct A _________%
    Balanced/Asset Allocation
    Prin Mgmt Corp/Prin Global Inv
    Principal LifeTime Strategic Income Separate Account A _________%
    Principal LifeTime 2010 Separate Account A _________%
    Principal LifeTime 2020 Separate Account A _________%
    Principal LifeTime 2030 Separate Account A _________%
    Principal LifeTime 2040 Separate Account A _________%
    Principal LifeTime 2050 Separate Account A _________%
    Large U.S. Equity
    Columbus Circle Investors
    LargeCap Growth Separate Account A _________%
    Principal Global Investors
    LargeCap S&P 500 Index Separate Account A _________%
    UBS / TS&W
    LargeCap Value I Separate Account A _________%
    Small/Mid U.S. Equity
    AllianceBernstein/CCI
    SmallCap Growth I Separate Account A _________%
    DFA/Vaughan Nelson/LA Capital
    SmallCap Value II Separate Account A _________%
    Principal Global Investors
    MidCap Blend Separate Account A _________%
    SmallCap S&P 600 Index Separate Account A _________%
    Principal Global/Barrow Hanley
    MidCap Value III Separate Account A _________%
    Principal Real Estate Inv
    Real Estate Securities Sep Acct A _________%
    Turner/Mellon/Jacobs Levy
    MidCap Growth III Separate Account A _________%
    International Equity
    Principal Global Investors
    Diversified International Separate Account A _________%
    International Growth Separate Account A _________%
    Principal Global Investors/DFA
    International SmallCap Separate Account A _________%

    • ANSWER:

  34. QUESTION:
    My draft 401k plan..any suggestions?
    This is what I decided on:

    Asset Allocation/Balanced
    Fidelity Freedom 2050 Fund 5%

    Fixed Income
    PIMCO Total Return Fund 5%

    Stock – (Growth/Income)
    Vanguard Institutional Index (S&P 500) 15%
    Vanguard Mid Cap Index Fund 15%

    Stock – (Growth)
    Fidelity Contrafund 20%
    Harbor Capital Appreciation Fund 15%

    International – (Stock)
    American New Perspective Fund 15%
    Vanguard Emerging Markets 10%

    Do you think I have too much? Should I reallocate?

    I’m 24 and my employer maches 50cents to 1 dollar.

    • ANSWER:
      I think it is a very good plan. I would put a little less in the Contrafund only because the fund is too large.
      You are to be commended. It appears you have done your homework. Keep up the good work you should do very well.

  35. QUESTION:
    How to diverisfy my 401k?
    I’m 24 and my employer matches 50 cent per 1 dollar. I’m not sure how to diversify my portofolio as my employer offers so many.

    Asset Allocation/Balanced
    Fidelity Freedom 2050 Fund %

    Fixed Income
    Vanguard Prime Money Market %
    PIMCO Stable Value Fund %
    PIMCO Total Return Fund %
    Vanguard Total Bond Market Index Fund %
    Vanguard Inflation Protected Securities %

    Stock – (Growth/Income)
    Vanguard Institutional Index (S&P 500) %
    Longleaf Partners Fund %
    LSV Value Equity Fund %
    Vanguard Mid Cap Index Fund %
    Vanguard Small Cap Index Fund %
    Vanguard REIT Index Fund %

    Stock – (Growth)
    Fidelity Contrafund %
    Fidelity OTC Portfolio %
    Harbor Capital Appreciation Fund %
    Marsico Growth Fund %
    Royce Opportunity Fund %

    International – (Stock)
    American New Perspective Fund %
    Fidelity Diversified International %
    Vanguard Emerging Markets %
    Vanguard Total International Stock Index Fund

    What’s the difference between stock and stock growth? Co workers mentioned I should stay away from fixed income at all times and invest in international. I’m not sure how to diversify my portfolio. Any idea?
    This is what I decided on:

    Asset Allocation/Balanced
    Fidelity Freedom 2050 Fund 5%

    Fixed Income
    PIMCO Total Return Fund 5%

    Stock – (Growth/Income)
    Vanguard Institutional Index (S&P 500) 15%
    Vanguard Mid Cap Index Fund 15%

    Stock – (Growth)
    Fidelity Contrafund 20%
    Harbor Capital Appreciation Fund 15%

    International – (Stock)
    American New Perspective Fund 15%
    Vanguard Emerging Markets 10%

    Do you think I have too much? Should I reallocate?

    • ANSWER:
      At your age you could be up to 100% invested in stocks. I think interest rates will go no lower at this time fixed income is a poor investment.
      You need to be in the best funds available.
      My allocation for you is as follows:
      Royce Opportunity Fund 25%
      Harbor Capital Appreciation Fund 25%
      Vanguard Small Cap Index Fund % 5%
      Vanguard Emerging Markets 10%
      American New Perspective Fund 25%
      Fidelity Contrafund 10%
      The three funds I have 25% in I believe are excellent. Contra is a good fund but I don’t think it should be a major player.
      Intrest rates will go up. When the rates have risen then I would be moving money over to them. The vanguard total market is a good fund.

  36. QUESTION:
    I currently have a Wells Fargo 401k plan…help!?
    Does anyone know specifics of which funds are large cap funds, small cap, and midcap? What is an index fund? Also, does anyone have any recommendation of percentages to put each in…..
    for example, the choices are
    dodge & cox
    s&p 500 index fund
    diversified equity fund
    capital growth fund
    large company groth fund
    s&p midcap index fund
    diversified small cap fund
    nasdq-100 index
    euopacific growth fund
    asset allocation fund

    **there are a few more choices but you get the idea….any advice, I am very young so I have a long time before retirement

    • ANSWER:
      What you are asking, I believe, is what should your asset allocation be. Good question to ask. Since it depends on several factors, such as your age, income, expectations, etc. the ideal solution would be an “asset allocation calculator”. Found one for you that should answer your question. It is from a gov. agency so should be non-biased.

  37. QUESTION:
    Where should I countribute for these 401k fund options?
    Asset Allocation/Balanced

    Fidelity Freedom Income Fund
    Fidelity Freedom 2000 Fund
    Fidelity Freedom 2010 Fund
    Fidelity Freedom 2020 Fund
    Fidelity Freedom 2030 Fund
    Fidelity Freedom 2040 Fund
    Fidelity Freedom 2050 Fund

    Fixed Income

    Vanguard Admiral Treasury Money Market Portfolio
    PIMCO Stable Value Fund
    PIMCO Total Return Fund
    Vanguard Total Bond Market Index Fund

    Stock – (Growth/Income)

    Vanguard Institutional Index (S&P 500)
    Longleaf Partners Fund
    LSV Value Equity Fund
    Vanguard Mid Cap Index Fund
    Vanguard Small Cap Index Fund
    Vanguard REIT Index Fund

    Stock – (Growth)

    Fidelity Contrafund
    Fidelity OTC Portfolio
    Harbor Capital Appreciation Fund
    Marsico Growth Fund
    Royce Opportunity Fund

    International – (Stock)

    American New Perspective Fund
    Fidelity Diversified International
    Templeton Emerging Markets Fund
    Vanguard Emerging Markets Stock Index
    Vanguard Total International Stock Index Fund

    • ANSWER:
      You’ve got great options in the Vanguard family so I would stick with those as Vanguard has the lowest expense ratios among mutual funds. Put at least 20-30% in international funds.

      Vanguard Institutional Index
      Vanguard Small Cap Index
      Vanguard Mid Cap Index
      Vanguard Emerging Markets
      Vanguard Total International Stock Index

  38. QUESTION:
    I’m entering into my companies 401K and I’m having a hard time trying to elect which Investment to choose?
    Use whole numbers (for example: 0%, 3%, 25%, 72%); total must equal 100%.
    B. You may elect automatic Account Rebalancing to help maintain the long-term investment strategy you decide is appropriate for
    meeting your savings goals. Once you’ve created your asset allocation, automatic Account Rebalancing can rebalance your account
    as often as you choose: quarterly, semi-annually, or annually.
    SM SSgA Government Money Market Fund %
    TR PIMCO Total Return Fund – Class A %
    7X DWS High Income Plus Fund – Class S %
    SI SSgA Life Solutions(SM) Income & Growth Fund %
    SB SSgA Life Solutions(SM) Balanced Growth Fund %
    SG SSgA Life Solutions(SM) Growth Fund %
    AG AllianceBernstein Growth and Income Fund -
    Class A
    %
    A2 DWS Large Cap Value Fund – Class A %
    S5 SSgA S&P® 500 Index Fund %
    VZ Neuberger Berman Partners Fund – Advisor
    Class
    %
    OC Oppenheimer Capital Appreciation Fund – Class A %
    MD Fidelity® Advisor Equity Growth Fund – Class T %
    XQ Franklin Rising Dividends Fund – Class A %
    9E SSgA S&P® MidCap 400 Index Strategy Fund %
    M1 Alger MidCap Growth Institutional Fund – Class I %
    J8 Janus Adviser International Growth Fund – Class S %
    Z4 Templeton Growth Fund, Inc. – Class R %
    TS Allianz NFJ Small-Cap Value Fund – Class A %
    SR SSgA Russell® 2000 Index Strategy Fund %
    AR Alger SmallCap Growth Institutional Fund – Class I %

    • ANSWER:
      If you want to keep it simple, choose one of the target retirement funds. They are one stop shopping – SSGA Life Solutions Growth fund – 100%.

      Or if you want to pick individual funds:
      45% ssga s&p500 index
      10% ssga mid cap index
      05% russell 2000 index
      20% Janus international
      20% pimco total return

      Many different ways of building a portfolio. It just depends on how you want to tackle it. If you want to have a comfortable retirement, I suggest you hit the books & learn about investing. Nobody cares as much about your money as you do.

  39. QUESTION:
    Help with 401k allocations?
    Hi, I am just about to start my 401k at age 34, company matching 50% of my 6%,and have the following options. Given the current financial climate, what are my best options. I have been advised to keep it 90% stock and 10% Bonds.?

    Short Bonds/Stable/MMkt:
    Stable Value

    Interm./Long-Term Bonds:
    Pimco Totl Rtrn

    Large-Cap Stocks:
    Black Rck Eqty Div
    Dvfd Stk Indx
    Amer Fds Grwth Fd

    Small/Mid-Cap Stocks:
    Janus MdCap Val
    Morgan MdCap Gr
    Allianz Sm Value
    AIM Sm Cap Eqty
    Black Rck Sm Cap Gr

    International Stocks:
    Amer Fds Europac

    Multi Asset Other:
    This is basically a wide range of TRowe RA, like TRowe RA 2040.

    Thanks!

    • ANSWER:
      First off, put a chunk into one of the TR life cycle funds…2050 if they go that high…they are a little consevative by design, so picking the long-range gets you just a little aggressive, but still getting some bond coverage. 40% there would give you plenty left to diversify …in 15% bundles across the board 15/ international…15/small cap growth…
      15/midcap growth…and 15 in Blackrock’s big cap
      ( more cautious would be same order but 10-10-20-20)
      It’s going to take time for all facets of the market to recover…but at 34, you’ve got time… in nine months or so you should be seeing some progress… if you don’t like what you see. it’s not that big of a deal to change allotments….( some plans let you change on- line anytime…some are more restricted….but you’re not going to go broke even if you can only occasionally change). Being spread out is a key…

  40. QUESTION:
    What should I do with my 401k allocations due to the current stock market volatility?
    When I signed up for my company’s 401k plan, there was a little survey thing that I filled out based on age, retirement age, etc, and it basically told me what funds to invest in and at what percentage. I am concerned now as I have lost apporximately 20% of my total value in the past couple of weeks. My question is two-fold, firstly, should I just leave my current funds as is, or should I reallocate to different funds and at what amounts? I do not want to close my 401k altogether, and would only consider that as a last resort option. I do, however, want what little savings I have accumulated in the past few years to not vaporize before my eyes. I am 24 years old, so retirement is not anytime soon, but I still have my concerns.

    My current 401k Portfolio:
    BlackRock Total Return Fund 5%
    Van Kampen Equity and Income Fund 15%
    MFS Value Fund 10%
    BlackRock Large Cap Core Fund 15%
    BlackRock Large Cap Growth Fund 15%
    BlackRock Mid-Cap Value Equity Portfolio 5%
    BlackRock International Value Fund 20%
    MFS International New Discovery Fund 10%
    Oppenheimer Small & Mid Cap Value Fund 5%

    Additional Funds available through my 401k Plan:
    Merrill Lynch Ready Assets Trust
    BlackRock Government Income Portfolio
    Van Kampen Growth and Income Fund
    Alger LargeCap Growth Fund
    Alger MidCap Growth Fund
    Delaware Trend Fund

    • ANSWER:
      I hope you read my e mail and get some good out of it.

  41. QUESTION:
    What is your advise about transfering money from Larg cap stock to larg cap value in month of May 07 /?
    I have larg cap stock growth = 21%
    Mid cap stock growth = 12 %
    small cap stock = 8%
    fixed income =18 %
    Larg cap value = 2 %
    International = 24 %
    s & p = 10 %
    balanced (2030) = 5 %
    These are all in 401K plan.
    What will be my asset allocation at my age of 51 year ?
    I know month of May 07 is right time for me to adjust my portfolio,.I have almost 130K in the 401k.

    Please guide me

    • ANSWER:
      Is this the old “cash your stock gains in May” adage? I wouldn’t worry too much about that, personally; there’s not too much need to time the market perfectly when you’re talking about decades of investment.

      If you’re 8 years from retirement, it’s time to start shifting into the less volatile investments. Right now you have about 81% stock, 1% bonds (I figure the 2030 plan is about 4/5th stock, 1/5th bonds), and 18% cash (fixed income).

      You have lots of overlap in your stocks — Large Cap and S&P 500 are about the same thing. Large Cap Value is going to be *more* volatile than Large Cap, so I don’t think that’s your ideal destination.

      At this point, I’d think you’d want somthing like 70% stock and 30% bonds — so I’d consider selling some of the stock funds and moving to a bond fund. Read up on the operating expense ratios — these are payments made to the managers of the fund, taken from the profits. You want those to be low below 0.50% (and for index funds like your S&P, below 0.30%).

      Finally, I think the fixed income is a little too conservative for just about everyone except those who want *no* risk at all (ie, retirees who know they have enough to live on and don’t want any surprises at all). I’d sell that and move it to bonds; you’ll pick up a couple percent extra gain.

      Doug

  42. QUESTION:
    457 Deferred Compensation Plan for Retirement ICMARC, What are my best options to start out with?
    I have a seperate retirement plan aside from my 401k, I am a government employee and I am wondering what are the best choices for me to invest my money into from my biweekly deposits of for now. I have just started this job and i am 23 yoa. I intend to increase my contribution as i repay my student loans. My employer will match a maximum of 0 a year as long as I contribute at least 00 of my own money. The Plan holder is ICMARC. Here are the following options:

    1) A simple enrollment into a “Milestone Fund” where ICMARC will invest my contributions for me and I will have no involvement.

    2) These are all Vantage Trust Options:
    *Stable Value/Money Market Funds
    -Vantage Trust (VT) PLUS
    -VT Cash Management

    *Bond Funds
    -VT Core Bond Index Class II
    -VT PIMCO Total Return, Class Administrative
    -VT Inflation Protected Securities
    -VT PIMCO High Yield, Class Administrative

    *Balanced/Asset Allocation Funds
    -VT Milestone Retirement Income
    -VT Milestone 2010-2040 (5 year increment options)
    -VT Model Portfolio Savings Oriented
    -VT Model Portfolio Conservative Growth
    -VT Model Portfolio Traditional Growth
    -VT Model Portfolio Long-term Growth
    -VT Model Portfolio All-Equity Growth
    -VT Asset Allocation
    -VT Fidelity Puritan

    *U.S. Stock Funds
    -VT Equity Income
    -VT Eaton Vance Large Cap Value, Class A
    -VT Allianz NFJ Dividend Value, Class Admin.
    -VT 500 Stock Index, Class II
    -VT Growth and Income
    -VT Broad Market Index, Class II
    -VT BlackRock Large Cap Core Retirement, Class K
    -VT Legg Mason Value Trust, Class FI
    -VT Growth Fund
    -VT Fidelity Contrafund
    -VT Calvert Social Investment Fund Equity Portfolio, Class A
    -VT T.Rowe Price Growth Stock Fund, Class Advisor
    -VT Fidelity Magellan Fund
    -VT Select Value
    -VT Columbia Mid Cap Value, Class Z
    -VT Mid/Small Company Index, Class II
    -VT Royce Premier Fund, Class Service
    -VT Aggressive Opportunities Fund
    -VT Harbor Mid Cap Growth, Class Admin.
    -VT Rainier Small/Mid Cap Equity Fund
    -VT Discovery Fund
    -VT T.Rowe Price Small Cap Value Fund, Class Advisor
    -VT Royce Value Plus, Class Service
    -VT First American Real Estate Securities Fund, Class Y

    *International Stock Funds
    -VT Third Avenue Value Fund
    -VT International Fund
    -VT Overseas Equity Index Fund, Class II
    -VT Fidelity Diversified International Fund

    I know these are a lot of options, but I would like to know the best options to go with to start out. I can allocate my contributions to 6 different options totaling 100% for my contribution and my employers contribution. I would like to manage my own funds and watch the markets to ensure the best possible growth for my retirement fund. I will be posting a very similar question regarding my 401a options (gov’t 401k).

    • ANSWER:

  43. QUESTION:
    Should I Sell Off Taxable Investment Accounts for a Future Real Estate Purchase?
    I was just wondering what you thought of this. I currently rent, but will purchase a primary residence in the next three to six years. I have taken a look at the values in my taxable investment accounts around February of 2009 (an investment portfolio low point for me) and compared them with the value today. There exists a significant increase in value.

    Do it make sense for me to sell off these taxable investment accounts so that I could put the gains into something more safe- say the Vanguard Short Term Bond Fund? Then, when I make the real estate purchase in the next three to six years, I will be able to pay for most of the property, if not all of it, in cash? I figure everybody needs somewhere to live, and you are either paying rent or paying off a mortgage. If I can purchase a residence with cash, then my retirement budget will be reduced significantly because a major expense (housing) will already be paid for.

    I should tell you that I have a goal to retire early (the sooner the better), but realistically, I don’t think I could do it for another seven to ten years.

    Someone who knows more about investing than me suggested that I stay away from my tax deferred/tax exempt (401k, Roth IRA, etc) accounts and focus on the taxable accounts if I am going to take this course of action.

    I am thinking that housing prices will not rise significantly in three to six years, but I am not sure that the gains I see today in my taxable accounts will necessarily still be there three to six years from now. That is why I thought it might be a good idea to lock into those gains now.

    I know that if I do sell off these taxable investment accounts, my asset allocation will completely change, and I will need to make necessary adjustments moving forward to get it back on track. Also, does it make any difference from a tax perspective, if I sold all of these taxable investment accounts in one year or if I spread it out over two or more years?

    Thus far, I have only added to these taxable investment accounts, so the idea of selling them is somewhat unusual to me.

    Thank you for your advice.

    • ANSWER:
      Leave your investment right where it is at. At the time you are looking at, you will probably realize another up turn in the values of your current investments. I like the future, versus the last two years. At that time, withdraw what you want, and buy the house. You will need to pay taxes on some of the gains, but your home is a very important asset for your secured future.

  44. QUESTION:
    I need some advice about my 401k plan?
    which funds would you invest in, and what percent. I know nothing about this stuff.

    I am 30 years old and I make ,000 anually. I am currently contributing 7% of my income.

    These are my choices.

    Morgan Stanley Liquid Asset Fund
    Victory Fund for Income – Class R
    Federated Total Return Bond Fund – Class R
    Pioneer Strategic Income Fund – Class R
    American Century Inflation Protection Bond Fund – Class R
    Invesco Balanced-Risk Retirement 2020 Fund – Class R
    Invesco Balanced-Risk Retirement 2030 Fund – Class R
    Invesco Balanced-Risk Retirement 2040 Fund – Class R
    Invesco Balanced-Risk Retirement 2050 Fund – Class R
    Invesco Balanced-Risk Retirement Now Fund – Class R
    BlackRock Global Allocation Fund, Inc. – Class R
    Eaton Vance Large Cap Value Fund – Class R
    MainStay ICAP Select Equity Fund – Class R3
    MainStay MAP Fund – Class R3
    American Century Growth Fund – Class R
    MainStay Large Cap Growth Fund – Class R3
    Victory Established Value Fund – Class R
    Prudential Jennison Mid-Cap Growth Fund – Class R
    Victory Small Company Opportunity Fund – Class R
    MainStay ICAP International Fund – Class R3
    Oppenheimer International Growth Fund – Class N
    Pioneer Emerging Markets Fund – Class R

    • ANSWER:

  45. QUESTION:
    What can the nursing home or medicaid do? Unfair spouse allocation.?
    My dad is in a nursing home and has been for a year. My mom is the sole owner of the house – they changed that about 4 years ago. They have no assets and he is on medicaid. For the last year, the family has depleted his 401k money to pay the amount the home believes is what my mother’s contribution to his care should be. Come January, that money is gone.

    They only allocate enough money for part of the mortgage, utilities, insurance, and her prescriptions. Everything else she is on her own and they want the rest of his pension, 401k, and social security. If she pays what they want her to pay she would be in the hole 0 every single month and would have to live on ramen noodles and toast. She would not be able to afford to go to the doctor, buy any clothes or medicine, and wouldn’t have a dime to put towards savings for an emergency. And thats with my family living here and paying half the bills. If we moved out, she would be about 1400 in the hole monthly.

    If she doesn’t pay the home, what happens? The family has no money or assets or anything to help, and medicaid increases her spousal obligation every year.

    What will they do if she doesn’t pay? Will the home kick him out if he is not physically able to be in a residence (in a wheel chair, late stage alzheimers, needs round the clock care)?
    Whats the difference between a regular nursing home and a government one? Other then crappy service I’m assuming?

    Also, what is a medicaid waiver?

    • ANSWER:

  46. QUESTION:
    My 401k is -52.52% What should I do?
    Should I change my investment portfolio? right now I have a 100% in the Principal LifeTime 2040 Separate Account. The YTD change is -43.08. The Last 3 mo’s -27.31, 1yr -39.25, 3yr -6.02, 5yr .57

    I know that I was told to not even look at my 401k because I am only 30 and it will go up and down, -52% is a lot of damn money i’ve lost.

    Investment strategy: The investment seeks a total return consisting of long-term growth of capital and current income. The fund invests in underlying Principal domestic and foreign equity, hybrid, and fixed-income funds according to an asset allocation strategy designed for investors having an investment time horizon comparable to that of the fund. It allocates the assets more conservatively over time. The fund may invest in any of the Institutional Class shares of the equity funds or fixed-income funds of Principal Funds, at the sub-advisors discretion.
    rincipal Disc LargeCap Blend Inst — —13.04
    Principal International Growth Inst — —10.46
    Principal International I Inst — —8.77
    Principal LargeCap Growth I Inst — —7.37
    Principal LargeCap Blend I Inst — —6.83

    Principal LargeCap Growth Inst — —6.77
    Principal Bond & Mtg Securities Inst — —5.71
    Principal High Yield I Inst — —5.54
    Principal LargeCap Value Inst — —4.59
    Principal LargeCap Value I Inst — —4.45
    The reason that I have 100% in the fund is because I was told that the fund is diversified in itself. Meaning that it invests in a mixture of aggressive and conservative investments. Is this not true?
    I also thought about leaving it in this fund hoping that it will bounce back, but if you look at its history it shows losing money for the last 3 years.

    • ANSWER:
      I’m in the same boat buddy. But I agree with the above poster that you haven’t lost any money until you withdraw. The trick is to be financially stable enough to be able to leave a great sum of money alone for many years. You will soon get the rewards :D
      I would stick with it.