The equivalent funds in your 401(k) are:
BlackRock Equity Index Fund (0.03%) - VFIAX equivalent
BlackRock Russell 2000 Index Fund (0.07%) - VEXAX equivalent
BlackRock EAFE Equity Index Fund (0.08%) - VTIAX equivalent
BlackRock U.S. Debt Index Fund (0.05%) - VBTLX equivalent
There is no total stock market fund as such in your 401(k) plan, but you can get there with a 80:20 split of the amount of contributions you intend to make to US equities, between the first two funds. Russell 2000 index is almost the equivalent of Extended Market index.
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That said, you have a portfolio of $297k, let me call it $300k for round numbers. 5% of it is $15k. Seriously consider buying I bonds for $10k this year, they are yielding 5.2% right now, and you are capped at $10k per calendar year (hurry, Treasury Direct requires 2 business days to settle, so you must place your purchase order by December 27th). Then in January but another $10k for 2024.
I bonds are bonds, the interest they pay is NOT taxable until you redeem, and they mature only 30 years later. Unlike the Total Bond Market Index fund which lost value in 2022 and still did not recover as of today, I bonds are guaranteed to never lose value. Also thanks to the fixed rate component of I bonds, you are guaranteed to earn at least 1.3% per year even under the worst of circumstances.
Assuming you will max out the 401k ($23k), Roth IRA ($7k) and I bonds ($10k) per year, bonds would account for $10k / ($23k +$7k +$10k) = 25%. Meaning until you decide to up your bond percentage to 25% of your portfolio, you are not obligated to purchase the full complement of I bonds in any given year -- except for the initial $20k I am urging you to do. Wouldn't you rather have your bonds never lose value ever??
You can then direct all your 401(k) and Roth IRA contributions to simply equities.
Ditch the total bond fund. It is NOT going to serve the purpose you think it would, in your portfolio. If I am wrong in my assumption that you picked Total Bond Index purely because of Boglehead orthodoxy, please let me know why you decided on 5% allocation to bonds; may be I can then see why I bonds may or may not fulfill that need.
PS: Fellow NJ resident here, although I am 25 years older than you and married. I am completely soured on total bond market index fund, I bought into the BH Kool Aid, and dismissed I bonds previously. 2022 taught me a lesson that I would never forget and am going to preach that lesson forward...
BlackRock Equity Index Fund (0.03%) - VFIAX equivalent
BlackRock Russell 2000 Index Fund (0.07%) - VEXAX equivalent
BlackRock EAFE Equity Index Fund (0.08%) - VTIAX equivalent
BlackRock U.S. Debt Index Fund (0.05%) - VBTLX equivalent
There is no total stock market fund as such in your 401(k) plan, but you can get there with a 80:20 split of the amount of contributions you intend to make to US equities, between the first two funds. Russell 2000 index is almost the equivalent of Extended Market index.
-------
That said, you have a portfolio of $297k, let me call it $300k for round numbers. 5% of it is $15k. Seriously consider buying I bonds for $10k this year, they are yielding 5.2% right now, and you are capped at $10k per calendar year (hurry, Treasury Direct requires 2 business days to settle, so you must place your purchase order by December 27th). Then in January but another $10k for 2024.
I bonds are bonds, the interest they pay is NOT taxable until you redeem, and they mature only 30 years later. Unlike the Total Bond Market Index fund which lost value in 2022 and still did not recover as of today, I bonds are guaranteed to never lose value. Also thanks to the fixed rate component of I bonds, you are guaranteed to earn at least 1.3% per year even under the worst of circumstances.
Assuming you will max out the 401k ($23k), Roth IRA ($7k) and I bonds ($10k) per year, bonds would account for $10k / ($23k +$7k +$10k) = 25%. Meaning until you decide to up your bond percentage to 25% of your portfolio, you are not obligated to purchase the full complement of I bonds in any given year -- except for the initial $20k I am urging you to do. Wouldn't you rather have your bonds never lose value ever??
You can then direct all your 401(k) and Roth IRA contributions to simply equities.
Ditch the total bond fund. It is NOT going to serve the purpose you think it would, in your portfolio. If I am wrong in my assumption that you picked Total Bond Index purely because of Boglehead orthodoxy, please let me know why you decided on 5% allocation to bonds; may be I can then see why I bonds may or may not fulfill that need.
PS: Fellow NJ resident here, although I am 25 years older than you and married. I am completely soured on total bond market index fund, I bought into the BH Kool Aid, and dismissed I bonds previously. 2022 taught me a lesson that I would never forget and am going to preach that lesson forward...
Statistics: Posted by lakpr — Sat Dec 23, 2023 2:41 am