There is an old phrase, "paralysis by analysis," that comes to mind. Let's agree on this:
- OP doesn't know his risk tollerance, and likely wont for some time
- OP cannot project tax burden he will face 30 years from now
- To start saving now, is better then to wait to save until OP does understand these things.
I agree with the second and third, but only somewhat with the first. I don't think he, as a beginning investor, can quantify his risk tolerance, but I think he would have a good idea what seeing a huge drop in his portfolio would do to him psychologically.
The sage advice you have to understand options in a 401k is great. But how will he be able to accurately calculate the impact of high expense fund options... or even know they are "high expense?"
Which is why we asked him to find out and let us know so we could offer advice.
How can he do an analysis of IRA vs 401k without a detailed understanding of current and projected (30 years hence) tax liabilities? Paralysis by analysis for a newbie.
I never said anything about projecting tax liabilities.
Most 401k's today offer target retirment funds, as well as total allocaiton funds - such as the one he is in today.
Most probably do, but we do not KNOW that his does.
My "Target Retirement" suggestion was a projection based on another thing I think we agree on:
- His current fund is more conservative then the typical asset allocation for a person of his age
I agree with that (that his fund is more conservative than typical for his age), but if he has already stated he is risk adverse, he shouldn't be in a more aggressive fund until he's done the research and determined whether or not he is comfortable with the higher volatility.
Frankly, he could sit tight with what he owns and do the research you guided him towards. He should start with a goal of being able to explain, to a finance novice, what he owns and why.
Think we agree here.