Hello -
I’m seeking some advice/input about rebalancing my employer sponsored 401k plan.
Background:
- 31 years old, married, debt free, no kids, no plans for kids
- 401k Plan administered through Charles Schwab
- 401k balance ~$34,000
- Salary 175,000, stable and likely increasing over the next 10 years, topping out around 200k
- Current household income ~210K
- Employer contributes about 3K per year to 401k on discretionary basis. I consider and treat this money as an extra bonus. I do not count on it being there.
- I contribute $750 every 2 weeks to the 401k, for 2018 max contribution of 18,500, will increase this number in 2019 to max out contribution of 19,000.
Two years ago when I opened the account, the Schwab plan consisted of about 6-10 funds. None of them were broad market or S&P500 index funds. Most had expense ratios at or approaching 1%. Therefore, I elected to open a self-directed account within the 401K, and direct 100% of my contributions to it.
Every 2 weeks $750 goes from my paycheck into the self directed account, and I manually invest about 75% in SCHB (Schwab’s US Broad Market index fund, Expense ratio 0.03%, commission free), about 10% in SCHF (Schwab’s International Equities Index - ER: 0.06%, commission free), and I keep the remaining ~15% in cash in the account, thinking that perhaps I can buy a dip, or have some liquidity if another fund catches my eye. I recognize that 15% in cash is probably too high. I currently have no allocation for bonds. This all has to be done manually every couple of weeks. I only make trades that are commission free. Sometimes I forget to login and invest my bi-weekly contribution, and I miss out on time in market.
Schwab recently revised the options available through my employer sponsored plan. Instead of the old 6-10 funds, there are now over 20 funds, which seem to be high quality. A notable addition to the plan is VOO. Whereas before there were no broad market or SP500 funds, the plan now offers what is perhaps the standard for low cost set it and forget it funds.
I would really like to take advantage of the convenience of using the plan’s easy percentage allocations, and automatic investments offered versus manually doing it myself every 2 weeks (and sometimes forgetting and missing time in the market).
Current:
100% to Self Directed Account
Within Self Directed Account:
- ~75% SCHB - Schwab Broad Market Index, Expense Ratio 0.03% (Commission free)
- ~10 % SCHF- Schwab International Equity Index, Expense Ratio 0.06 (Commission free)
- ~15% Liquid cash
I am considering this rebalance:
-
0% To Self-directed account.
-
80% VOO - Vanguard SP500 Index, Expense Ratio 0.04%
-
5% SCHF - Schwab International Equities Fund, Expense Ratio 0.06%
-
5% SCHE - Schwab International Emerging Markets, Expense Ratio 0.13%
-
10% SCHZ - Schwab U.S. Aggregate Bond ETF, Expense Ratio 0.04%
Please let me know what you all think. Am I missing anything for a well balanced portfolio? Is there any negative to switching funds from SCHB to VOO at this point in terms of continuing to build principal within a fund and taking full advantage of compounding interest? I don't plan on selling SCHB to buy VOO, but rather just letting it continue to gain value (hopefully) with the market, and no longer buying any more of it, while redirecting my new contributions to VOO.
Thank you.
Submitted September 06, 2018 at 09:47PM by trash_day https://ift.tt/2NjBECb
