[emmie1]

Hello. My county has chosen AIG VALIC as our new 403b provider. I plan to roll over the 45k from my old Met Life account. I want to work toward attaining a 70/30 stock/bond ratio. Presently I have 100% stock holdings and this is far too scary and aggressive for my situation (12 years until retirement) and a single gal with 130k left on her mortgage--5.5%, 30yr. fixed.

I currently have 200k with Vanguard in a taxable account:
Vanguard Total Stock Market
Vanguard Tax Managed Small Cap
Vanguard Tax Managed International
3 month Emergency Fund
20k in CDs

Here is what I've been thinking:

Max out this year's Roth contribution and purchase Vanguard Total Bond Fund.
Other holdings in my Roth include: Dodge and Cox International and Vanguard Reit.

In our new VALIC 403B my choices are limited and pricey but here are the funds which would give me some bond coverage:

T Rowe Price Retirement 2020 (PARBX) 70% stocks / 30% bonds Expense Ratio: 0.94
Goldman Sachs High Yield A (GSHAX) Expense Ratio: 1.12
Western Asset Core Bond Fl (WAPIX) Intermediate Term Bond Expense Ratio: 0.72
PIMCO Real Return A (PRTNX) Inflation Protected Expense Ratio: 0.90
American Century Capital Preserve Inv (CPFXX Money Market--1 yr. return 3.94) Expense Ratio: 0.48

So there you have it. How do I best invest my 45k from Metlife to obtain bonds in my portfolio? I welcome your suggestions. Thank you! Emmie

[sschullo]

Hi emmie,
Welcome. I like your asset allocation in the taxable account. You have done your homework. Congratulations! It is very tax efficient. You are right to start a bond allocation because you are getting closer to retirement and you want to reduce volatility and risk. However, you currently have 20k in CDs, so you are not 100% stocks.
Before you start investing in bonds, I would suggest you read Larry Swedroe's "The only guide to a Winning Bond Strategy". It’s a great book.

My school district has AIG VALIC for the TPA, (third party administrator) our 457 plan. Before I answer your question, I have a couple. Clarify please, is AIG Valic the TPA for the 403b as you say or a 457B? or both?
You provide the expense ratios of each fund but what is the AIG VALIC fee for administering the plan? AIG VALIC charges .15% for administrative expenses at my district LAUSD, but also has revenue sharing agreements which are usually hidden in the expense ratios and confusing. I would guess that all of their funds you listed have revenue sharing agreements.

As you probably know, AIG VALIC needs to be watched very carefully. They don't like to provide their administrative fee or the revenue sharing costs to employees. Those fees are often on top of what you reported in your post. For example, we have Pimco Total Return, but I would never invest in it because the total fee is 83 basis points which is a lot of money for a bond fund. Does your district have an oversight committee to oversee the plan made up of employees and district front office staff? We have an oversight committee and I am a member.
Sorry for all of these questions but if you have read many posts and the information provided on this site, you have to be very careful of large insurance companies and their fees.
Again welcome to this site. You already have some good choices in Vanguard, Dodge & Cox. You are obviously very knowledgeable about investments and investing and the impact of fees.

Hope this helps. Others will also provide you with objective comments. Most of us here are free from the biases of the financial management profession.
Steve

[emmie1]

Hi, Steve. Thanks so much for your response.

You wrote: " Clarify please, is AIG Valic the TPA for the 403b as you say or a 457B? or both?
You provide the expense ratios of each fund but what is the AIG VALIC fee for administering the plan? AIG VALIC charges .15% for administrative expenses at my district LAUSD, but also has revenue sharing agreements which are usually hidden in the expense ratios and confusing."

Our 403b is strictly a 403b plan. I'm worried that VALIC doesn't have a bond fund that will fit my needs--they all have high price ratios and I fear, hidden costs. I asked the VALIC rep about hidden costs i.e. 12-b1 fees, etc.--she said there were no additional administrative costs. The posted expense ratio was the total cost. I'm leery. I don't think we have an oversight committee, but I will check.

Perhaps I should continue setting up CDs and contribute to the bond portion of my Roth each year until I
catch up to my 70/30 stock/bond ratio. Could take awhile.

I will continue to read about bonds and check out Larry Swedroe's book. Thanks for the book tip. Bonds have always mystified me.

Since it looks like the VALIC offering of bonds is too expensive for me to dive into, I need to decide how to allocate my 45k roll over from Met Life. VALIC did not offer any Vanguard or Fidelity funds.
The funds with the lowest expense ratio--0.50 are:
Dreyfus Intl Stock Index
Dreyfus Small Cap Stock Index
Dreyfus Mid Cap Index

Any thoughts on these funds? All are rated as 3 star funds by Morningstar.

Steve, Many thanks for taking your time to respond. I really appreciate it. Victoria