Retirement planning, Roth 401k and Roth IRA?
Hi, I'm 23 and currently contributing to my Roth 401k to receives full matching from the company. I would like to start a Roth IRA at the beginning of 2008 with T Rowe Price. My 401k is doing good so far, but I calculated my future retirement needs and realized that I should start a Roth IRA and max it out each year. I've been doing quite a bit of research on T. Rowe and their funds and would like to start out with funds that has total international exposure first. My concern/question is, does T Rowe Price funds' past performances accurate? It seems to me that most of their funds perform better than other companies. Are there anything different about them from other fund companies that I should know about? They seems a bit more aggressive (which is good), but is that the case? here are my current funds, I put more in Europacific that other though. With these pick, should I go with a conservative route in a Roth IRA instead? thanks should I drop Smallcap World R4? Alger Small Cap = 5% Columbia Small Cap Value Fund II = 6% Munder Mid-Cap Core Growth A = 6% Phoenix Mid Cap Value = 7% American Funds SmallCap World R4 = 5% American Funds Cap Wld G&I R4 = 7% American Funds New World R4 = 6% American Funds EuroPacific R4 = 16% American Funds Growth Fund R4 = 7% American Funds New Economy R4 = 6% Black Rock S&P 500 Index = 6% Davis NY Venture = 6% Van Kampen Comstock = 6% Eaton Vance Large-Cap Value = 6% AIM Real Estate = 5% Total = 100% Sorry, I forgot to mention. Those funds listed are what I'm currently holding in my 401k. They took a few hits a few weeks ago but are now on track. Their performances meet my expectation, but did not exceed it. I plan to retire in my mid 50s, about 35 years from now. That's part of the reasons why I went with Roth. I plan on retiring early and withdraw from my principle until I'm 60. By the way, I'm able to manage all funds in the account without any problem thru a website provide by my employer. I manage my contribution, allocation, earning, funds info.....with the tools given to me by my company.
Public Comments
- Is that the list of your future contributions into your Roth 401k? Yikes! I suppose my first statement should've been, "Good, you're saving for retirement." And doing it in a Roth anything means you're taking the tax hit now for future tax-free distributions, both on your contributions and earnings. But you really need to do some homework on your contributions. Keeping track of all 15 funds requires something like Quicken. Besides, there's a good chance there's a lot of overlap in the stocks these funds invest in, so you may not be getting the kind of diversification you expect. The Black Rock S&P 500 should be the core of your 401k's investments, then pick and choose the rest so that you have a good mix of styles, caps, and specialities you want to dabble in. As for your Roth IRA, T Rowe Price is a good family of funds to work from. I wouldn't be as concerned about accuracy of the past performance numbers as much as what they invest in (which gives you an indication of whether it's something you want to build your portfolio around), and how much the admin costs are (so you get the most of your investment, not the fund managers). And you probably have thought through this, but make sure your 401k and IRA investments are being considered as a whole, not just one acct vs the other, so you don't find yourself overlapping much the same your 401k currently does. Good luck.
- Congratulations on getting an early start on retirement savings! T. Rowe Price is one of the best mutual fund houses out there and is a great place for your IRA. But I don't think you should invest entirely in international stocks, even at your young age. Keep about 80-90% in stocks and 10-20% in investment grade bonds. Within the stock portion, you need to divide it between domestic growth stocks and internationals. In other words, diversify. Your 401(k) portfolio is impressive but complicated! Realistically, you only need 3 or 4 well-chosen mutual funds to get ample growth and diversification for long-term returns. If you want to try something "speculative" (precious metals, REITS, etc.) thats fine, but limit it to 5% or so of the total. You're off to a good start.
- Good for you for saving for your retirement. The person before brought up a couple good points - it's difficult to keep track of so many different funds, and you should definitely think about all your money as a whole rather than separate accounts. If you found published performance reports about T. Rowe Price, they should be accurate. The financial industry is very highly regulated and they could not get away with publishing fictional reports. In general, because you are young and can't touch this money for 36+ years (without penalty), you can be more aggressive. But really, you should talk with a financial advisor - I found mine at www.plannerconnect.com - to help you pick a good balance of different mutual funds.
