Retirement account hurdle (403b)

[Shredder]

Hello all,

This is my first post.

I was just curious how everyone is handling their allocations within 403b or 401k type accounts?

About half of my investment portfolio is within one of these accounts and it only seems to have one asset class available that works for the permanent portfolio (vanguard total stock market).

Any ideas?

Thanks in advance!
Matt

Post has been edited to include:

Funds that I have available in 403b:

422 ING Global Bond Portfolio - Initial Class
799 Vanguard® Total Bond Market Index Fund - Institutional
697 ING Fixed Plus Account III
467 ING Money Market Fund - Class A
1257 ING T. Rowe Price Capital Appreciation Portfolio - Inst
622 ING T. Rowe Price Equity Income Portfolio - Institutional
925 Pioneer Equity Income Fund - Class A Shares
566 Vanguard® Institutional Index Fund - Institutional Shares
2208 Vanguard® Total Stock Market Index Fund - Institutional
572 American Funds The Growth Fund of America® - Class R-4
194 Janus Twenty Fund - Class T Shares
920 Baron Growth Fund - Retail Shares
682 ING Clarion Real Estate Portfolio - Institutional Class
1183 ING FMR SM Diversified Mid Cap Portfolio - Institutional
1197 Vanguard® Mid-Cap Index Fund - Institutional Shares
1198 Vanguard® Small-Cap Index Fund - Institutional Shares
1004 American Funds Capital World Growth and Income FundSM - R-4
573 American Funds EuroPacific Growth Fund® - Class R-4
746 ING Solution 2015 Portfolio - Initial Class
790 ING Solution 2025 Portfolio - Initial Class
761 ING Solution 2035 Portfolio - Initial Class
764 ING Solution 2045 Portfolio - Initial Class
767 ING Solution Income Portfolio - Initial Class


My thoughts are that the ING Money Market A fund seems to be "good enough" for the cash part of permanent portfolio (it states it holds US dollar denominated securities in 60 days or shorter terms I think...). Vanguard Total Stock market works for the Stock part of permanent portfolio. This leads me only left with doing long term bonds and Gold outside the 403b.

That works out well as my wife and I will be starting IRA accounts for 2011 and 2012 ASAP, so that gives me somewhere to invest in long term treasury bonds.

Does this seem logical? 

My only concern so far now is that the normal order of operations for investing seems to be:
1. Employer Pension (401k or 403b) up to employer match.
2. Roth IRA up to max amount.
3. 401k or 403b up to max.
4. Taxable account.

But, in my case I'll be purchasing gold outside of a tax deferred account somewhere between steps 2 and 3, which makes me feel as though I'm giving up some tax help from the 403b. (My political beliefs are that it is our job to starve the government of every dollar we can legally to keep the beast from growing.)

Thanks again,
Matt

[clacy]

Just try to get as close to 4 x 25% as you can.  Don't beat yourself up over it, it is what it is.  Often times you'll have a short term bond fund (close to cash) option as well, so you could put money in there.

[kobe1]

Hi Shredder,

Welcome to the Forum.  I would encourage you to read through as many previous postings as you can.  Most topics have been discussed before.  Also, a specific question supported by specific details about your current situation will allow folks to provide more useful answers to you.

Check out this thread http://gyroscopicinvesting.com/forum/ht ... ic.php?t=8

In general, I recommend starting off as close to a 4 x 25 HBPP with as much of your money as you can (or as much as you feel comfortable with) given the accounts that you have and the investment options available within each account.  Then you direct future investments into new accounts to compliment your existing holdings and work towards a 100% HBPP allocation.

[patrickjhall]

Agreed on the cash portion. I think MediumTex has some good posts on how Stable Value funds are "close enough." Also call into the plan providers. My wife's 403b has access to a brokerage window that was not advertised on the plans website or paperwork.

[rickb]

I'd say nearly all 401K's have some sort of cash option that is probably OK.  For example guaranteed interest funds, although not quite as safe as Treasury only MM funds, are generally quite safe. 

Another possible approach is to use a medium term bond fund (Ttreasuries if the 401K has a Treasury bond fund, highest quality corporate bond fund if not) instead of equal parts cash and LT bonds.  For example, you could allocate half your 401K to Vanguard Total Stock Market Index and half to a medium term bond fund, and then in your taxable accounts allocate half to gold and 1/4 to each of cash and LT bonds.

[6 Iron]

Shredder, is this your only tax advantaged account or do you also have an IRA?

[Shredder]

Hi guys,

I added the following to the main post to give some further information:

Post has been edited to include:

Funds that I have available in 403b:

422 ING Global Bond Portfolio - Initial Class
799 Vanguard® Total Bond Market Index Fund - Institutional
697 ING Fixed Plus Account III
467 ING Money Market Fund - Class A
1257 ING T. Rowe Price Capital Appreciation Portfolio - Inst
622 ING T. Rowe Price Equity Income Portfolio - Institutional
925 Pioneer Equity Income Fund - Class A Shares
566 Vanguard® Institutional Index Fund - Institutional Shares
2208 Vanguard® Total Stock Market Index Fund - Institutional
572 American Funds The Growth Fund of America® - Class R-4
194 Janus Twenty Fund - Class T Shares
920 Baron Growth Fund - Retail Shares
682 ING Clarion Real Estate Portfolio - Institutional Class
1183 ING FMR SM Diversified Mid Cap Portfolio - Institutional
1197 Vanguard® Mid-Cap Index Fund - Institutional Shares
1198 Vanguard® Small-Cap Index Fund - Institutional Shares
1004 American Funds Capital World Growth and Income FundSM - R-4
573 American Funds EuroPacific Growth Fund® - Class R-4
746 ING Solution 2015 Portfolio - Initial Class
790 ING Solution 2025 Portfolio - Initial Class
761 ING Solution 2035 Portfolio - Initial Class
764 ING Solution 2045 Portfolio - Initial Class
767 ING Solution Income Portfolio - Initial Class


My thoughts are that the ING Money Market A fund seems to be "good enough" for the cash part of permanent portfolio (it states it holds US dollar denominated securities in 60 days or shorter terms I think...). Vanguard Total Stock market works for the Stock part of permanent portfolio. This leads me only left with doing long term bonds and Gold outside the 403b.

That works out well as my wife and I will be starting IRA accounts for 2011 and 2012 ASAP, so that gives me somewhere to invest in long term treasury bonds.

Does this seem logical? 

My only concern so far now is that the normal order of operations for investing seems to be:
1. Employer Pension (401k or 403b) up to employer match.
2. Roth IRA up to max amount.
3. 401k or 403b up to max.
4. Taxable account.

But, in my case I'll be purchasing gold outside of a tax deferred account somewhere between steps 2 and 3, which makes me feel as though I'm giving up some tax help from the 403b. (My political beliefs are that it is our job to starve the government of every dollar we can legally to keep the beast from growing.)

Thanks again,
Matt

[KevinW]

I agree that Vanguard TSM is perfect for PP stock and the money market account is acceptable for cash.

You are in the common situation of being unable to implement a purist PP with the funds available in your employer plans.  I recommend first deciding for yourself whether you'll prioritize PP purity or prioritize maxing out those accounts. Once you make that decision, the other decisions tend to fall into place.

[6 Iron]

Matt, I think your plans are solid. Very few of us are able to remain pure due to limits of our workplace retirement accounts, but we do the best we can. Congratulations on pursuing an aggressive savings plan. Old Matt will thank you.

[MediumTex]

Old Matt will thank you.

I can almost hear old Matt cheering from the future down through time:  "Go 2012 Matt!  Don't forget about me!  Be prudent!"

I don't really have anything to add to the great replies above except that in a pinch you might use some of the Vanguard total bond market fund inside the tax deferred account and some EDV outside of your tax-deferred accounts to cover the long term bond portion.  Something like that is obviously not perfect, but EDV can provide opportunities for creativity when faced with fund constraints.

This is just a guess, but I'll bet if you set up the cash and bond portions of your portfolio as follows it would have about the right average maturity that you are looking for in the combined cash/LT bond holdings:

20%: money market fund
15%: Vanguard total bond market fund
15%: EDV (held in taxable account)

An approach like this would allow you to keep an extra 10% of your PP in your tax deferred account, which could make the whole thing a little easier to manage. 

[AgAuMoney]

normal order of operations for investing seems to be:
1. Employer Pension (401k or 403b) up to employer match.
2. Roth IRA up to max amount.
3. 401k or 403b up to max.
4. Taxable account.

Unless your 401k/403b is really stellar, or your tax situation spectacularly bad, I'd reverse your #3 and #4.  Your 403(b) choices aren't bad.  Aren't great either.  And I have no idea of your costs so I'd strongly lean toward putting taxable before additional into the employer plan.

I believe you should diversify your asset tax treatment as much as possible, so ideally you would have 1/3 of your assets in tax-deferred, tax-free (roth), and taxable.  Physical gold might be considered yet another tax status if you think you might be disposing of it in a way not subject to the 28% tax on collectibles.

Also consider your taxable account can be combined with short and medium-term/emergency savings.  While you can use Roth principal any time, due to annual contribution limits you can never replace what you take out.

Another consideration is you might have a Roth option in your 401(k)/403(b).  If so, your employer match will NOT be Roth, but your contribution would be -- an instant 50/50 split in your #1.

edit:  And one other thing...  The more your PP is split between accounts and along asset category lines, the harder it will be to rebalance.  (You cannot move assets between 401/403/Roth/taxable.)  So you will want to have multiple parts of the PP in multiple accounts if you can.