# Help Allocate My 401(k) **URL:** \ **Category:** In My Humble Opinion\ **Created:** [March 24, 2014, 4:27pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453 "2014-03-24T16:27:25Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [March 24, 2014, 4:27pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/1 "2014-03-24T16:27:25Z")
Seriously. I have no idea how I ought to be doing this. I’m 31 and my employer doesn’t offer matching so I’m not maxing out my contributions right now (though I’m upping my contribution to 10% of income.) Over [here](http://boards.straightdope.com/sdmb/showthread.php?t=718637&page=2), **jasg** notes that index funds have lower fees but there don’t see to be any of those offered by my employer and/or its 401(k) provider (ADP). These are my options: > [@](#): > > Retirement Reserves Money Fund Web Report Ticker: MRRXX > Investment Objective and Strategy: The fund seeks current income, preservation of capital and liquidity available from investing in a diversified portfolio of short-term money-market securities. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > Goldman Sachs Government Income Fund - Service Class Quicktake Report Ticker: GSOSX > Investment Objective and Strategy: The investment seeks a high level of current income, consistent with safety of principal. The fund normally invests at least 80% of its net assets plus any borrowings for investment purposes in securities issued or guaranteed by the U.S. government, its agencies, instrumentalities or sponsored enterprises and in repurchase agreements collateralized by such securities. Its investments in non-U.S. government securities must be rated AAA or Aaa by a nationally recognized statistical rating organization (“NRSRO”) at the time of purchase, or, if unrated, must be determined by the Investment Adviser to be of comparable credit quality. A Fund’s net asset value and yield are not guaranteed by the U.S. government or by its agencies, instrumentalities, or sponsored enterprises. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > Franklin Total Return Fund - Class R Quicktake Report Ticker: FTRRX > Investment Objective and Strategy: The investment seeks high current income, consistent with preservation of capital. The fund normally invests at least 80% of its assets in investment grade debt securities and investments, including government and corporate debt securities, mortgage- and asset-backed securities, floating interest rate corporate loans and debt securities, and municipal securities. It may also invest up to 20% of its total assets in non-investment grade debt securities, including up to 5% in securities rated lower than B by S&P or Moody’s, which may include defaulted securities. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > American Funds American High Income Trust - Class R2 Quicktake Report Ticker: RITBX > Investment Objective and Strategy: The investment seeks to provide a high level of current income; the secondary investment objective is capital appreciation. The fund invests primarily in higher yielding and generally lower quality debt securities (rated Ba1 or below or BB+ or below by a nationally recognized statistical rating organization or unrated but determined by the fund’s investment adviser to be of equivalent quality), including corporate loan obligations. It may also invest a portion of its assets in securities of issuers domiciled outside the United States. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > BlackRock Global Allocation Fund, Inc. - Class R Quicktake Report Ticker: MRLOX > Investment Objective and Strategy: The investment seeks to provide high total investment return. The fund invests in a portfolio of equity, debt and money market securities. It may invest up to 35% of its total assets in “junk bonds,” corporate loans and distressed securities. The fund may also invest in Real Estate Investment Trusts (“REITs”). It has no geographic limits on where it may invest and may invest in the securities of companies of any market capitalization. Investments in foreign markets entail special risks such as currency fluctuations and political instability. Higher-yielding, lower-rated fixed-income securities are subject to greater risk of principal than higher-rated, lower-yielding securities. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > Invesco Equity and Income Fund - Class R Quicktake Report Ticker: ACESX > Investment Objective and Strategy: The investment seeks current income and, secondarily, capital appreciation. The fund invests, under normal circumstances, at least 80% of its net assets (plus any borrowings for investment purposes) in equity and income securities, and in derivatives and other instruments that have economic characteristics similar to such securities. It invests, under normal circumstances, at least 65% of its net assets in income-producing equity investments, such as dividend paying common or preferred stocks. The fund may invest up to 25% of its net assets in securities of foreign issuers or depositary receipts. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > BlackRock Equity Dividend Fund - Class R Quicktake Report Ticker: MRDVX > Investment Objective and Strategy: The investment seeks long-term total return and current income. The fund seeks to achieve its objective by investing primarily in a diversified portfolio of equity securities. Under normal circumstances, it will invest at least 80% of its assets in equity securities and at least 80% of its assets in dividend paying securities. The fund may invest in securities of companies with any market capitalization, but will generally focus on large cap securities. It may also invest in convertible securities and non-convertible preferred stock. The fund may invest up to 25% of its total assets in securities of foreign issuers. Foreign investing involves special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > Davis New York Venture Fund - Class R Quicktake Report Ticker: NYVRX > Investment Objective and Strategy: The investment seeks long-term growth of capital. Davis Selected Advisers, L.P. (“Davis Advisors” or the “Adviser”), the fund’s investment adviser, uses the Davis Investment Discipline to invest Davis New York Venture Fund’s portfolio principally in common stocks (including indirect holdings of common stock through depositary receipts) issued by large companies with market capitalizations of at least $10 billion. Historically, the fund has invested a significant portion of its assets in financial services companies and in foreign companies, and may also invest in mid- and small-capitalization companies. The Fund’s shares are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency and involve investment risks, including possible loss of the principal amount invested. Principal risks include: Market risk, Company risk, Selection risk. Please see the prospectus for further discussion. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > American Funds The Growth Fund of America - Class R2 Quicktake Report Ticker: RGABX > Investment Objective and Strategy: The investment seeks growth of capital. The fund invests primarily in common stocks and seeks to invest in companies that appear to offer superior opportunities for growth of capital. It may invest a portion of its assets in securities of issuers domiciled outside the United States. The investment adviser uses a system of multiple portfolio counselors in managing the fund’s assets. Under this approach, the portfolio of the fund is divided into segments managed by individual counselors who decide how their respective segments will be invested. Share price and return will vary, so you may lose money. Investing for short periods makes losses more likely. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity. Investments made outside the United States involve special risks such as currency fluctuations, political instability, differing securities regulations and periods of illiquidity. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > AllianceBernstein Discovery Value Fund - Class R Quicktake Report Ticker: ABSRX > Investment Objective and Strategy: The investment seeks long-term growth of capital. The fund invests primarily in a diversified portfolio of equity securities of small- to mid-capitalization U.S. companies. Under normal circumstances, it invests at least 80% of its net assets in securities of small- to mid-capitalization companies. For purposes of this policy, small- to mid-capitalization companies are those that, at the time of investment, fall within the capitalization range between the smallest company in the Russell 2500™ Value Index and the greater of $5 billion or the market capitalization of the largest company in the Russell 2500™ Value Index. Investments in the stocks of smaller companies are often associated with higher risks, including greater volatility than in stocks of larger companies. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > BlackRock Mid Cap Value Opportunities Fund - Class R Quicktake Report Ticker: MRRFX > Investment Objective and Strategy: The investment seeks capital appreciation and secondarily, income, by investing in securities, primarily equity securities that fund management believes are undervalued and therefore represent an investment value. The fund invests at least 80% of the assets in equity securities of mid cap companies. Mid cap companies are companies that at the time of purchase have market capitalizations in the range of companies included in the Standard & Poor’s (S&P) MidCap 400 Value Index. It may invest up to 30% of total assets in the securities of foreign companies. The fund may invest in securities denominated in currencies other than the U.S. dollar. Investments in small and medium sized companies involve greater risk not associated with investments in larger, more established companies. Investments in foreign markets entail special risks such as currency fluctuations and political instability. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > Janus Enterprise Fund - Class R Quicktake Report Ticker: JDMRX > Investment Objective and Strategy: The investment seeks long-term growth of capital. The fund pursues its investment objective by investing primarily in common stocks selected for their growth potential, and normally invests at least 50% of its equity assets in medium-sized companies. Medium-sized companies are those whose market capitalization falls within the range of companies in the Russell Midcap Growth Index. Market capitalization is a commonly used measure of the size and value of a company. It may also invest in foreign securities, which may include investments in emerging markets. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > Franklin Small Cap Value Fund - Class R Quicktake Report Ticker: FVFRX > Investment Objective and Strategy: The investment seeks long-term total return. The fund normally invests at least 80% of its net assets in investments of small-capitalization (small-cap) companies. Small-cap companies are companies with market capitalizations (the total market value of a company’s outstanding stock) under $3.5 billion at the time of purchase. It generally invests in equity securities that the fund’s investment manager believes are undervalued at the time of purchase and have the potential for capital appreciation. It may invest up to 25% of its total assets in foreign securities. Investments in the stocks of smaller companies are often associated with higher risks, including greater volatility than in stocks of larger companies. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > BlackRock Value Opportunities Fund - Class R Quicktake Report Ticker: MRSPX > Investment Objective and Strategy: The investment seeks long term growth of capital. The fund invests primarily in common stock of small companies and emerging growth companies that fund management believes have special investment value. For these purposes, small companies are defined as companies whose market capitalization is similar to the market capitalization of companies in the Russell 2000 or the S&P SmallCap 600 at the time of the fund’s investment. The fund will invest primarily in U.S. companies that do most of their business in the United States, but may invest a portion of its assets in foreign companies. Investments in foreign markets entail special risks such as currency fluctuations and political instability. Investments in the stocks of small and emerging growth companies are often associated with higher risks, including greater volatility than in stocks of larger companies. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > Ivy Small Cap Growth Fund - Class R Quicktake Report Ticker: WSGRX > Investment Objective and Strategy: The investment seeks to provide growth of capital. The fund invests, under normal circumstances, at least 80% of its net assets in common stocks of small capitalization companies. Small capitalization companies typically are companies with market capitalizations within the range of companies in the Russell 2000 Growth Index at the time of acquisition. The adviser emphasizes smaller companies positioned in new or emerging industries where the adviser believes there is opportunity for higher growth. Its investments in equity securities may include common stocks that are offered in initial public offerings (IPOs). > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > AllianceBernstein International Value Fund - Class R Quicktake Report Ticker: AIVRX > Investment Objective and Strategy: The investment seeks long-term growth of capital. The fund invests primarily in a diversified portfolio of equity securities of established companies selected from more than 40 industries and more than 40 developed and emerging market countries. These countries currently include the developed nations in Europe and the Far East, Canada, Australia and emerging market countries worldwide. The fund invests significantly (at least 40%–unless market conditions are not deemed favorable by the Adviser) in securities of non-U.S. companies. In addition, it invests, under normal circumstances, in the equity securities of companies located in at least three countries. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > Janus Overseas Fund - Class R Quicktake Report Ticker: JDIRX > Investment Objective and Strategy: The investment seeks long-term growth of capital. The fund pursues its investment objective by investing, under normal circumstances, at least 80% of its net assets in securities of issuers or companies from countries outside of the United States. It also may normally invest up to 20% of its assets, measured at the time of purchase, in U.S. issuers, and it may, under unusual circumstances, invest all or substantially all of its assets in a single country. The fund may have significant exposure to emerging markets. It may also invest in U.S. and foreign debt securities. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > Thornburg International Value Fund - Class R3 Quicktake Report Ticker: TGVRX > Investment Objective and Strategy: The investment seeks long-term capital appreciation; current income is the secondary objective. The fund invests primarily in foreign securities or depository receipts of foreign securities. It may invest in developing countries, but under normal conditions those investments are expected to comprise a smaller proportion of the fund than investments in developed countries. Foreign investments involve greater risks and potential rewards than U.S. investments. These risks include political and economic uncertainties of foreign countries, as well as the risk of currency fluctuations. These risks may be more pronounced for investments in developing countries. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > American Funds Capital World Growth and Income Fund - Class R2 Quicktake Report Ticker: RWIBX > Investment Objective and Strategy: The investment seeks long-term growth of capital while providing current income. The fund invests primarily in common stocks of well-established companies located around the world, many of which have the potential to pay dividends. It invests, on a global basis, in common stocks that are denominated in U.S. dollars or other currencies. Under normal market circumstances, the fund invests a significant portion of its assets in securities of issuers domiciled outside the United States. The fund may also invest in issuers in developing countries. Share price and return will vary, so you may lose money. Investing for short periods makes losses more likely. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity. Investments made outside the United States involve special risks such as currency fluctuations, political instability, differing securities regulations and periods of illiquidity. > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > Pioneer Emerging Markets Fund - Class R Quicktake Report Ticker: PEMRX > Investment Objective and Strategy: The investment seeks long-term growth of capital. The fund invests primarily in securities of emerging market issuers. Although the fund invests in both equity and debt securities, it normally emphasizes equity securities in its portfolio. Normally, the fund invests at least 80% of its total assets in the securities of emerging market corporate and government issuers. It invests in at least six emerging markets. The fund may invest up to 20% of its total assets in securities of issuers in any developed country (other than the U.S.). > Obtain additional fund information including a summary prospectus, prospectus and annual report. > > Delaware REIT Fund - Class R Quicktake Report Ticker: DPRRX > Investment Objective and Strategy: The investment seeks maximum long-term total return, with capital appreciation as a secondary objective. The fund invests primarily in securities of companies principally engaged in the real estate industry. Under normal circumstances, it will invest at least 80% of its net assets in real estate investment trusts (REITs). > Obtain additional fund information including a summary prospectus, prospectus and annual report. My current balance is split three ways between Blackrock Global Allocation, Ivy Small Cap and Pioneer Emerging Markets. ---
**Author:** ![ReticulatingSplines](https://avatars.discourse-cdn.com/v4/letter/r/e274bd/32.png) [@ReticulatingSplines](https://boards.straightdope.com/u/ReticulatingSplines)\ **Post date:** [March 24, 2014, 4:36pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/2 "2014-03-24T16:36:35Z")
If there’s no employer match, why don’t you just invest in an IRA instead? Those options all stink. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [March 24, 2014, 4:43pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/3 "2014-03-24T16:43:21Z")
> [@ReticulatingSplines](#): > > If there’s no employer match, why don’t you just invest in an IRA instead? Those options all stink. Other than a broader choice of investmernts, what’s the benefit? I’ll hit the IRA contribution limit in a year or two. I’m a long way from hitting the 401(k) contribution limit. ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [March 24, 2014, 4:48pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/4 "2014-03-24T16:48:13Z")
I can’t provide specific advice but some broad stuff would apply. When you say you’ll hit the contribution limit in a few years do you mean you’re 68 or so? Also, define for yourself how much risk you’re willing to tolerate and look for funds that shoot for that goal. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [March 24, 2014, 4:55pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/5 "2014-03-24T16:55:43Z")
I think he means that he will hit the IRA contribution limit, which in 2014 is $5,500. Through an employer sponsored 401(k), the limit is significantly higher - $17,500. If you are contributing $5,500 or less to your retirement, and your employer does not match, then the traditional IRA is superior. Otherwise you should go through your employer. Also consider a ROTH IRA if you meet the income thresholds. ---
**Author:** ![ReticulatingSplines](https://avatars.discourse-cdn.com/v4/letter/r/e274bd/32.png) [@ReticulatingSplines](https://boards.straightdope.com/u/ReticulatingSplines)\ **Post date:** [March 24, 2014, 4:56pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/6 "2014-03-24T16:56:38Z")
> [@Really\_Not\_All\_That\_Bright](#): > > Other than a broader choice of investmernts, what’s the benefit? I’ll hit the IRA contribution limit in a year or two. I’m a long way from hitting the 401(k) contribution limit. Well it does depend on how much you make, but you can deduct traditional IRA contributions from your taxes, and Roth IRAs are ideal if you expect to be in a higher tax bracket at retirement. That said, the broader choice of investments is a big deal. Your number one priority should be avoiding fees. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [March 24, 2014, 4:59pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/7 "2014-03-24T16:59:09Z")
I was looking through your choices for something like the S&P500 index fund but couldn’t find anything equivalent to that. The Janus Enterprise Fund is a mid-cap fund, so you might contribute to it. But you’re right; it’s a poor selection of funds and I’ll bet the fees are high. You might campaign for your HR department to change the trustee. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [March 24, 2014, 4:59pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/8 "2014-03-24T16:59:54Z")
To sum up, would it make sense for me to put $5,500 in a traditional IRA and then contribute any overage to the 401(k)? > [@Jonathan\_Chance](#): > > I can’t provide specific advice but some broad stuff would apply. When you say you’ll hit the contribution limit in a few years do you mean you’re 68 or so? No, what **Bone** said: I will be contributing $5,500. > [@ReticulatingSplines](#): > > Well it does depend on how much you make, but you can deduct traditional IRA contributions from your taxes, and Roth IRAs are ideal if you expect to be in a higher tax bracket at retirement. … my 401(k) contributions are tax deductible, so I’m not really seeing how that’s a benefit. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [March 24, 2014, 5:00pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/9 "2014-03-24T17:00:18Z")
The fees for each of these funds will be identified in the materials provided by them. They should generally be pretty close to each other. You can compare those fees to those that are offered by index funds outside your employer’s selection pool. Generally I’ve found the Vanguard index funds to have some of the lowest fees. Now a days they have funds based on your age. You can stick with the fund and it will adjust the risk downward over time. Keeps it pretty simple if that is available to you. At age 31, if you are not married and have no kids (i.e. less responsibilities) then I would go for a large portion (60% or so) in higher risk areas. Take advantage of your time horizon. I assume that you are comfortable in your contribution amounts and you won’t need to draw on them for a loan or anything like that. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [March 24, 2014, 5:02pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/10 "2014-03-24T17:02:24Z")
ROTH IRAs switch the timing of the tax. For traditional IRAs and 401(k)s, they are not taxable when you earn the dollars, but are taxable when you withdraw the funds, including any gains. ROTHs are the opposite. You pay your current tax rate now on everything that you put in, and then when you withdraw it’s not taxable, including any gains. THere is an intersection of curves when this is more worth it - some factors are time, and future tax brackets. ---
**Author:** ![ThisUsernameIsForbidden](https://avatars.discourse-cdn.com/v4/letter/t/b4bc9f/32.png) [@ThisUsernameIsForbidden](https://boards.straightdope.com/u/ThisUsernameIsForbidden)\ **Post date:** [March 24, 2014, 5:02pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/11 "2014-03-24T17:02:54Z")
I’m not reading through all of that, but I will tell you that the allocation of your funds has much to do with your age and how long it will be before you retire. Do some research on income vs. growth. ---
**Author:** ![ThisUsernameIsForbidden](https://avatars.discourse-cdn.com/v4/letter/t/b4bc9f/32.png) [@ThisUsernameIsForbidden](https://boards.straightdope.com/u/ThisUsernameIsForbidden)\ **Post date:** [March 24, 2014, 5:04pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/12 "2014-03-24T17:04:36Z")
> [@Bone](#): > > ROTH IRAs switch the timing of the tax. For traditional IRAs and 401(k)s, they are not taxable when you earn the dollars, but are taxable when you withdraw the funds, including any gains. > > ROTHs are the opposite. You pay your current tax rate now on everything that you put in, and then when you withdraw it’s not taxable, including any gains. THere is an intersection of curves when this is more worth it - some factors are time, and future tax brackets. I’m interested in learning more about these curves. Let’s say I have both a roth and a traditional. What proportion of my 5500 should go into each? ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [March 24, 2014, 5:07pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/13 "2014-03-24T17:07:40Z")
> [@Really\_Not\_All\_That\_Bright](#): > > To sum up, would it make sense for me to put $5,500 in a traditional IRA and then contribute any overage to the 401(k)? The tax deductibility of your traditional IRA will be affected if you also participate in your employer sponsored 401k. Depending on your income level, the IRA contriutions will not be tax deductible (no affect on the limit, yay). I believe if your AGI is over 60K you begin a phaseout, and after 70K (for filing individually, these all change if you file married) you lose the deduction entirely. These figures get adjusted each year, but they are in the ball park. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [March 24, 2014, 5:12pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/14 "2014-03-24T17:12:24Z")
Should have mentioned: I’m married, and we file jointly. The fees all seem to be in the 1-1.2% range. The Global Allocation thingy has a fee of 1.49 (and an abysmal return since I bought it) so I’ll be getting out of that one. ---
**Author:** ![UTejas](https://avatars.discourse-cdn.com/v4/letter/u/977dab/32.png) [@UTejas](https://boards.straightdope.com/u/UTejas)\ **Post date:** [March 24, 2014, 5:17pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/15 "2014-03-24T17:17:23Z")
In general, the suggested way to contribute is: 1. 401(k) until you hit the employer match. 2. Traditional or Roth IRA until you hit the contribution limits 3. 401(k) past the employer match until you hit the 401(k) contribution limit 4. Taxable account So since your employer match is $0, skip directly to step 2. In an IRA you have more freedom to avoid fees and select the funds in whatever allocation you so choose. As has been mentioned, a traditional IRA lets you avoid taxes now in order to pay taxes in retirement on your withdrawals. With a Roth, you’ll pay the taxes now in exchange for tax free growth and tax-free withdrawals later. There are some subtle points aside from that. One subtle point is that since you’ve already been taxed on the contributions to the Roth, so you can withdraw them at any point without penalty, whereas you have not been taxed on a traditional IRA’s contributions, so you have to pay taxes and a penalty if you try to withdraw them later. There are a few other points, as well. In general, if you are young a Roth will probably be better for you in the long run, but you should really check the numbers to be sure. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [March 24, 2014, 5:18pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/16 "2014-03-24T17:18:35Z")
If you file married, then the AGI limit on deducting your IRA contributions phaseout is 96K to 116K. That assumes you are both covered by an employer 401k. It’s different if one of you is covered and the other isn’t. Yay simplicity. I don’t believe these limits on IRA deductibility are affected by your contribution to your 401k or not. If you have the 401k available, then the limits apply. ---
**Author:** ![UTejas](https://avatars.discourse-cdn.com/v4/letter/u/977dab/32.png) [@UTejas](https://boards.straightdope.com/u/UTejas)\ **Post date:** [March 24, 2014, 5:19pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/17 "2014-03-24T17:19:03Z")
> [@Really\_Not\_All\_That\_Bright](#): > > Should have mentioned: I’m married, and we file jointly. > > The fees all seem to be in the 1-1.2% range. The Global Allocation thingy has a fee of 1.49 (and an abysmal return since I bought it) so I’ll be getting out of that one. For reference, the fees on most index funds with Vanguard are on the order of 0.04-0.3% for most common funds. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [March 24, 2014, 5:23pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/18 "2014-03-24T17:23:24Z")
Okay, I rebalanced my current balance to the funds with the lowest fees versus 3 year return. The wife is also covered by an employer 401(k), with match. Bone: are you saying that if we have a combined income of $96k-plus, our contributions to an IRA would not be fully deductible? I guess I’ll talk to the bank about setting up an IRA. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [March 24, 2014, 5:24pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/19 "2014-03-24T17:24:01Z")
> [@UTejas](#): > > … With a Roth, you’ll pay the taxes now in exchange for tax free growth and tax-free withdrawals later. There are some subtle points aside from that. One subtle point is that since you’ve already been taxed on the contributions to the Roth, **so you can withdraw them at any point without penalty,** whereas you have not been taxed on a traditional IRA’s contributions, so you have to pay taxes and a penalty if you try to withdraw them later. (my bold) This isn’t quite right. Early withdrawal penalties (10% of the withdrawal taken prior to age 59.5) apply to ROTH IRAs unless you meet one of the exceptions, and/or based on the timing and characteristics of your withdrawal (earning vs. contributions). You don’t get taxed since you’ve paid the tax already, but you are still subject to penalties in some circumstances. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [March 24, 2014, 5:25pm UTC](https://boards.straightdope.com/t/help-allocate-my-401-k/684453/20 "2014-03-24T17:25:08Z")
> [@Really\_Not\_All\_That\_Bright](#): > > Okay, I rebalanced my current balance to the funds with the lowest fees versus 3 year return. > > The wife is also covered by an employer 401(k), with match. **Bone: are you saying that if we have a combined income of $96k-plus, our contributions to an IRA would not be fully deductible?** I guess I’ll talk to the bank about setting up an IRA. Yes. [Next page](https://boards.straightdope.com/t/help-allocate-my-401-k/684453.md?page=2)