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Bogleheads Wiki

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19 pointstomcam4 comments

Probably some of the most boring, pragmatic financial advice out there, at least for people of reasonable means. Bogleheads won't help a very poor person much (most important solution: earn more), but for everyone else it's about as good as you'll get to set yourself up for success.

Been on there for 15+ years, and have contributed to the wiki myself. It never stops being relevant.

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Like over recent years I went from being independent to being an employee. We have a 401K with a good match, but the TDF choices were subpar. Good asset allocation and underlying funds, but they only offer the $0 minimum versions which are 0.75% ER, whereas the $3000 minimum version (it's a tech company, people are putting $3000 in no problem!) would be 0.12% ER.

Most people would put in the TDF and call it a day, which I wouldn't fault them for -- keeping it simple is what reduces friction and gets people to contribute earlier and contribute more. Except if you were there for 30 years, maxing your 401K and match every year, you'd be eating at least an extra $300,000 in expenses. Compound interest works both ways, after all.

The better solution? I will eventually petition HR to also add the Investor Class TDF options, but for now I instead simply rolled my own 4 fund portfolio with the remaining options to hit the same asset allocation, with damn near identical holdings. Took a few hours of research and making a spreadsheet with two or three very simple worksheets. All basic arithmetic.

I didn't just go from 75 basis points to 12 basis points: I ended up at 6.4 basis points. By comparison, a Vanguard TDF is 8 basis points. I'll re-balance it and adjust my contributions once a year, spending 5 minutes punching a few numbers into a spreadsheet to then punch corresponding numbers into the custodian's website. Set a reminder so I'll do it every year. Easy enough, and I reduced my expenses by ~91.5%.

If you nerd out and dig deep into the Bogleheads wiki, this kind of stuff becomes A) increasingly obvious and B) increasingly easy to recognize these opportunities.

> Easy enough, and I reduced my expenses by ~91.5%.

Fantastic comment. Super important to understand that even what looks like just a modest fee difference can mean the price of a house.

Yep. I still want to go to HR, but my plan is to go along with several influential (and internally liked) SVPs, where one of them can be like, "This Foof guy has a presentation on something important the company should do" to better ensure it gets done. It won't benefit me at this point, but it'll likely benefit the HR employee, and benefit potentially a thousand other employees. Very little effort to functionally give employees extra long-term money.

Another optimization I did was taking advantage of having BOTH a Traditional IRA and Roth IRA. So the advantage here is bonds that aren't tax-exempt get extra benefit from being in a Roth. One major benefit of a Roth IRA is that virtually all income earned within its protective shell is free from taxation. There are no dividend taxes, no interest taxes, no rent taxes, and no capital gains taxes. So the optimization you make at the custodian is keeping as much of the taxable bonds as possible in the Roth IRA, while keeping the Traditional IRA equity heavy, while still keeping on track with your target asset allocation.

These small differences add up to meaningful numbers after decades. Granted, the most important thing is contributing as much as you are comfortable with as early as possible -- compounding over 40+ years is a huge difference over compounding over 30 years.

> One major benefit of a Roth IRA is that virtually all income earned within its protective shell is free from taxation. There are no dividend taxes, no interest taxes, no rent taxes, and no capital gains taxes.

I… I wish I’d known that 25 years ago

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