Help with 401k allocating

[Anonymous]

+1 to look at fees.

Fees are expressed as a percent of total but in fact you need to think of them as a percent of expected return. So if you expect an 8% return and you pay a 2% fee, think of that as a 25% fee because it will eat a quarter of your profits.

Since over lifetime investing timelines the majority of your money is the compounded return a 2% fee eventually eats nearly a QUARTER OF YOUR LIFE SAVINGS.

Which is why people like vanguard with their tiny fraction of a percent fees.

[Anonymous]

Wow thats not many choices. Is there a cash fund so you can sit on the sidelines until you figure it out? Thats what I would recommend. If the company isnt matching your contributions there is no point in participating. Open your own IRA , or Roth IRA you will have more inveting freedom. 

[Open123]

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@Anonymous wrote:

Wow thats not many choices. Is there a cash fund so you can sit on the sidelines until you figure it out? Thats what I would recommend. If the company isnt matching your contributions there is no point in participating. Open your own IRA , or Roth IRA you will have more inveting freedom. 

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Right, if there's no matching, then see if there's a "self directed" option.  It's vitally important to avoid any and all mutual funds, if possible.

If not, then your suggestion to allocate the initial $5,500 into an IRA is a good one, but the person determine if it would qualify as a tax deduction.  For instance, if memory serves (not a cpa), if a person makes above $60K and is offered a employer retirement plan, IRA contributions are not tax deductible.

Then, even a 401k with fee based mutual funds may still be the best option, given the current tax benefits.

[Anonymous]

Another comment:

Your asset allocation should be correct across ALL your investments. It does not need to be correct within your 401k.

In other words you can focus your 401k on just the one or two good funds available there, and use investments in your IRA and elsewhere to hit the correct overall asset allocation.

You might therefore think of using your IRA to hit asset categories where your 401k choices aren't great.