I just got my first "big boy" job at the tender age of... 34, after a long time in academia and a startup stint that worked out pretty well (startup got acquired by public company) - so now it's the first time I have the option to contribute to an employer-matched 401k. There is a good selection of Vanguard funds (both target-date and mutual funds) and the default selection is the target-date 2045 fund. Since I am starting late, I only have a few thousand dollars stashed away in a Roth IRA with no other retirement savings, and I am planning to aggressively fund the 401k in order to catch up.

Do you recommend I just allocate 100% to the 2045 fund, choose the 2050 fund instead (I understand that it takes a while longer before it starts switching to more conservative selections) or add a percentage of VFINX too? (10-20% of my allocation?)

  • There's little difference between the 2045 and 2050 funds at this point in time. As 2045 approaches, that fund will be slightly more conservative than the 2050 fund, but the difference is pretty minor and things are likely to change between now and then anyway so I think either is an equally fine choice. That being said this seems like an opinion-based question so I'm voting to close. – user9760 Jun 14 '17 at 15:09
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    For the record, I would consider you as not starting late. Fifties, yes, mid 45's eh, 40's no. You can build a very sizable nest egg in a short time. – Pete B. Jun 14 '17 at 15:12
  • You're fine starting with a targeted fund, and getting started is by far the most important step, but the returns on them are often worse than if you pick your own funds. Look at the returns and fees of other funds they offer and see if there are funds that perform better and have better ratings (e.g. from Morningstar). If you do choose your own funds I would pick 4-5 from different classes (growth, value, bond, international) – D Stanley Jun 14 '17 at 15:14
  • What do your other investments (if any) look like? – user3067860 Jun 14 '17 at 21:33
  • I have a Roth IRA through Betterment, so it's 90% stocks ETFs - 10% bonds ETFs, all through Vanguard – nvergos Jun 15 '17 at 1:45

Vanguard starts to adjust the weightings at 25 years out, so you're certainly right that VTIVX will soon start to be a little less aggressive (in 2020). It's not going to go drastically conservative, just a little less aggressive; from 90/10 to 80/20, perhaps. So VFIFX would be more aggressive (90/10) for a little longer (until 2025).

On the other hand, the question is really when do you plan to retire? There's a reason that Vanguard starts adjusting things when they do; it's because you want a bit more stability and less likelihood of taking a huge loss that you won't have time to make up. Admittedly 25 years out seems far to be doing that, but still. Sure you need to grow your retirement fund as quickly as you can, but more growth equals more risk, and if you're already light, you're not exactly going to have a lot that you can afford to lose, will you?

If you don't have enough saved, and you know you don't have enough saved, you may want to accept that you have two major choices: put more in the 401k, enough that you catch up to where you needed to have been at this point, or put off your retirement date a few years. At which point VFIFX is simply accurate rather than aggressive.

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