After a bunch more comparisons, I decided that Fidelity had the best options with its Spartan Index Funds available for fees of 0.10% and 0.20%, compared to TIAA-CREF at 0.34. I did two more things to make sure. First, I called up Fidelity and made sure that there aren’t any additional fees like there are with Ing and second that the full line of Spartan Index funds would be available (unlike Ing). A nice lady on the other end assured me on both those counts. The second thing I did was flip through the Bogleheads forums to see what people advised other people in my position. It looked like the majority thought Fidelity a good second choice if you can’t get Vanguard and TIAA-Cref a distant third.
Next up I decided to do some asset allocation. Sadly our library does not carry the Bogleheads Guide to Investing/Retirement and friends and family have declined to get it off my wish list for me for the past two years. I may have to buy a copy myself. In the absence of the book I scoured Google, the Bogleheads forums, and finance sites I like such as CNNMoney or the motley fool.
I’m somewhere in my late 20s early 30s, as is DH. I have a fairly high risk tolerance over the long term (but pretty low-short term). Some of the calculators I looked at suggested 90% stocks, 10% bonds, and the 120-your age rules suggests the same. Because of our IRA savings is 100% stocks, I figured 80% stocks, 20% bonds would be good for our 403(b) portfolios. I’m not currently counting either cash or our house in the asset allocations (or the 529), the former because that’s short-term stuff and I get all risk averse about it, the latter because I am viewing it as a place to live rather than an asset– if we have to sell we will be readjusting everything at that time anyway.
Within stocks and bonds, there are many different calculators and random peoples suggesting many somewhat different allocations. Here are a few examples:
(random bogglehead for someone my age):
55% domestic large cap
25% domestic mid-small cap
20% intermediate term bonds
This is equivalent to the US Total Market Fund and has no international exposure
(another random bogglehead for someone my age):
25% large cap
10% emerging market
(a random bogglehead for a college prof my age):
25% S&P (large cap)
25% Extended (I don’t know what these are)
20% intermed treasury bonds
CNN Money’s Calculator
50% Large Cap
Bankrate and a bunch of other places with the same calculator
25% large cap
Some other folks recommended FFNOX which is a mixed index with a 0.22% fee
It is something like just under 50% S&P, just under 25% international, 15% bonds, 13% extended market, give or take a few % (and adding up to 100).
As you can see there’s a lot of variation, but in the end it probably won’t make a whole lot of difference. I did see some allocations that I did not care for– 50% stocks, 50% bonds, or 25% of 4 different random asset classes (or 1/N of some other set of asset classes). If you are overwhelmed though, doing 1/4 for four different index funds is not going to hurt you too badly, especially if 3 of them are stock funds and one of them is a bond fund. Satisficing will always beat paralysis in investing for the long-term.
I do notice that there’s a lot more pre-made portfolios for Vanguard Funds, so it took a bunch more searching to figure out what exactly the different Fidelity funds are. I like Yahoo’s paragraph long descriptions best, but the bogleheads forum was also full of interesting information. From this I found out that Fidelity does not do emerging market funds in index form– if you want them you have to pay a lot for them. Secondly, they’re not so big on small-caps, their mid-cap FSEMX does have small-cap but they call it a midcap. Also their total market fund FSTMX is listed under largecap, but actually contains you know, the total market, or 80% of it anyway.
So what am I going to do? (expense ratios in paren)
20% Bonds FIBIX (0.20)
40% Largish Cap FSTMX (0.10) I’m choosing this total market index over the S&P 500 FUSEX because my IRAs are almost but not quite 100% in domestic large cap Indexes and ETFs, so this tilts a little more towards small/midcap.
20% Foreign FSIIX (0.20)
20% Small-Mid Cap FSEMX (0.10)
If you have any idea on any of this stuff, I’m still a newbie… am I messing up? I’m wondering if I should just go 10% bonds. It’s a long time before retirement, or at least before I’ll be drawing down, and the expense ratio is 2x as big, even though it’s still less than 1/7 of what I was paying before. I guess to know the answer to that you’d have to know how much was in my IRAs and I’m not entirely sure on that myself– I tend to ignore the retirement accounts. Last I knew it was about the same size of my current 403(b) but the 403(b) will be growing a lot more starting this year now that I know we’re not limited in contributions.
Unlike Ing, Fidelity doesn’t want to send people around so they’re just sending us the paperwork, though I do have a number for a person in case we get overwhelmed by how to switch our mandatory retirement plan from ING and start the new elective 403(b).
What do you do for your work plan? Do you have access to Vanguard and their wonderful Target date funds? Were you as overwhelmed as I am? I think I’ve got a better handle on it now though.