Help me with 401k Asset Allocation

[tcu2003]

I realized it's been awhile since I looked at asset allocation in my 401k. I have some thoughts on what I want to do, but figured I would also ask this group. Background info:

Family of 4 (me - 43, DH - 48, DS - 12, DD - 8)
DH and I work for the same company, so if you would recommend same or different 401k asset allocations, tell me your thoughts and why!
DH says he wants to retire by 60; I will likely at least work 1-2 years after him, and possibly more if I'm still enjoying work. We are both engineers by degree, and work in an office.

Current NW is about $3.7M.
Cash - 6.7%
House - 18%
401ks - 63.6% (mix of regular and Roth 401ks, about 55% is DH's and 45% is mine)
Roth IRAs - 4.2%
Brokerage - 2.9%
529s - 3.8%
ESOP (Company) Stock - 0.6% (this is low as it's only a few years, but expect this to grow somewhat significantly over the next 10 years as we each get given stock each year)

I don't include our cars because we live in the land of suburbia, and typically drive them for 10+ years, so we would just buy a new one if something happened to one, or when we need to replace them.

Also relevant - we fully fund our 401k accounts each year, as well as backdoor Roth IRAs. We contribute $6k to each kid annually for their 529 account. We just started a brokerage account right about 2 years ago, and are trying to be better about moving cash over to it, though that is definitely a work in progress.

As you can see, the bulk of our NW is tied up in 401k accounts, so I should probably be better checking our current asset allocation more often. Here are the options we have:



Day One IncomeFlex Target Balanced Asset Allocation N/A

American Funds American Balanced R6 Balanced Funds RLBGX

Lord Abbett Bond Debenture R6 Bond Funds LBNVX

PGIM Absolute Return Bond R6 Bond Funds PADQX

Nuveen Core Impact Bond R6 Bond Funds TSBIX

Core Plus Bond / PGIM Fund Bond Funds N/A

American Funds New Perspective R6 International Funds RNPGX

American Funds New World R6 International Funds RNWGX

Calvert International Responsible Idx R6 International Funds CDHRX

Vanguard International Growth Adm International Funds VWILX

Vanguard International Value Portfolio International Funds VTRIX

American Funds American Mutual R6 Large Cap Funds RMFGX

American Funds Growth Fund of Amer R6 Large Cap Funds RGAGX

Vanguard FTSE Social Index Admiral Large Cap Funds VFTAX

Vanguard Institutional Index Instl Large Cap Funds VINIX

Vanguard Growth Index Institutional Large Cap Funds VIGIX

Vanguard Value Index I Large Cap Funds VIVIX

Calvert US Mid Cap Core Rspnb Idx R6 Mid Cap Funds CMCRX

Janus Henderson Enterprise N Mid Cap Funds JDMNX

Vanguard Mid Cap Index Ins Mid Cap Funds VMCIX

Vanguard Mid-Cap Value Index Admiral Mid Cap Funds VMVAX

Victory Sycamore Established Value R6 Mid Cap Funds VEVRX

Calvert Small-Cap R6 Small Cap Funds CALRX

Vanguard Explorer Adm Small Cap Funds VEXRX

Vanguard Small Cap Index Instl Small Cap Funds VSCIX

Vanguard Small Cap Value Index Admiral Small Cap Funds VSIAX

Guaranteed Income Fund Stable Value Fund N/A

[tcu2003]

My current 401k investments are:

64.45% Large Cap
28.5% Mid Cap
7.05% Int'l


And for DH:

55.57% Large Cap
34.82 Mid Cap
9.61 Int'l

[ken a.k.a OMK]

I think you are in great shape with your NW and age. I'm a retired EE with no financial background so don't listen to me. But it looks like you have many mutual funds and I read that 10 or less is best. I moved to index funds because they have very low management fees. One tracks the DOW and one tracks the S&P 500. It has been working for us. We have to take RMDs since we are 77 and 76 and have to look for things to spend them on. Making more money in retirement then we did working. 

[resolution]

It is hard to give recommendations since everyone's risk tolerance is very different.

It looks like you guys are about 12 years out from retirement and have your retirement funds in 100% equities. Unless you have some pension income or other safe investments, you may want to start shifting part of your funds into bonds and cash equivalents to hedge against sequence of return risk. I think the normal recommendation for bond allocations is too conservative, but you could take an investment risk tolerance calculator to determine how much risk you want to take as you approach retirement.

For international funds, Vanguard is recommending at least 20% international. I struggle with this as the domestic stocks have done so much better, my international allocation keeps falling behind because the domestic just grows faster.

[tcu2003]

Sept 21, 2024 15:45:43 GMT -5 ken a.k.a OMK said:

I think you are in great shape with your NW and age. I'm a retired EE with no financial background so don't listen to me. But it looks like you have many mutual funds and I read that 10 or less is best. I moved to index funds because they have very low management fees. One tracks the DOW and one tracks the S&P 500. It has been working for us. We have to take RMDs since we are 77 and 76 and have to look for things to spend them on. Making more money in retirement then we did working. 

We don’t actually have that many mutual funds. Those are just the options within our 401k that we can choose from. We each have 2 large cap funds, and 1 each mid and international funds. In general I picked different ones for each of us, though not sure it totally matters and I could decide pick the same ones.

[tcu2003]

Sept 21, 2024 15:50:27 GMT -5 resolution said:

It is hard to give recommendations since everyone's risk tolerance is very different.

It looks like you guys are about 12 years out from retirement and have your retirement funds in 100% equities. Unless you have some pension income or other safe investments, you may want to start shifting part of your funds into bonds and cash equivalents to hedge against sequence of return risk. I think the normal recommendation for bond allocations is too conservative, but you could take an investment risk tolerance calculator to determine how much risk you want to take as you approach retirement.

For international funds, Vanguard is recommending at least 20% international. I struggle with this as the domestic stocks have done so much better, my international allocation keeps falling behind because the domestic just grows faster.

Thank you! I probably should move some percentage over, though guessing it’ll be small. We keep too large of a cash reserve, so we’d likely be fine of we didn’t want to withdraw money for 2 years (though maybe in 10-12 years we’ll have gotten the too much cash issue under control).

[Rukh O'Rorke]

Sept 21, 2024 16:40:08 GMT -5 tcu2003 said:

Sept 21, 2024 15:50:27 GMT -5 resolution said:

It is hard to give recommendations since everyone's risk tolerance is very different.

It looks like you guys are about 12 years out from retirement and have your retirement funds in 100% equities. Unless you have some pension income or other safe investments, you may want to start shifting part of your funds into bonds and cash equivalents to hedge against sequence of return risk. I think the normal recommendation for bond allocations is too conservative, but you could take an investment risk tolerance calculator to determine how much risk you want to take as you approach retirement.

For international funds, Vanguard is recommending at least 20% international. I struggle with this as the domestic stocks have done so much better, my international allocation keeps falling behind because the domestic just grows faster.

Thank you! I probably should move some percentage over, though guessing it’ll be small. We keep too large of a cash reserve, so we’d likely be fine of we didn’t want to withdraw money for 2 years (though maybe in 10-12 years we’ll have gotten the too much cash issue under control).

I kind of disagree, depending on how much you spend per year. If you are looking at a 2% annual withdrawal in retirement or less, I think you could have a few years in cash (which you have too much of already I think) and keep the retirement accounts 100% stocks.

[tallguy]

I do not and will not ever hold bonds.  Just because something is "accepted wisdom" does not mean it is right for everybody.  It will NEVER be right for me.  If you decide it is right for you, great.  Do it because you have determined it is best for your situation, not because anyone tells you that's what you should do.  I also stuck way too long with international, and even had an emerging markets tilt for a while.  Too many years of relative underperformance persuaded me that it was no longer necessary to follow that conventional wisdom either.