Author Topic: 401K with high fees and no match vs taxable Vanguard account?  (Read 1985 times)

myTwelfAccount

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401K with high fees and no match vs taxable Vanguard account?
« on: October 30, 2017, 04:51:46 PM »
Hi all, I recently got a new job with a 401K through American Funds. Yay! But....there is no employee match for two years and the fees are very high from my research! I have maxed out 2017 Roth IRA, and I am set up to max out my 2017 HSA now too. I have between 5000-10000 additional dollars I'd like to invest for retirement in the coming months. When are the high fees of a 401K enough to take away that tax advantage?   A Roth 401K option is available to me.  I'm 24 and make 40000 a year.  I wonder if it would be a good idea to have money in a taxable Vanguard account instead of the 401K so that if I retire early, I can draw from that instead of my Roth IRA to avoid penalties. 
 
The funds are available to me are in the R2 class. For example: American funds 2045 Target Date Retirement R2, the expense ratio is 1.53!
https://www.google.com/search?q=american+funds+target+date+2045+r2&rlz=1CADEAC_enUS736US737&oq=american+funds+target+date+2045+r2&aqs=chrome..69i57j0.7002j0j7&sourceid=chrome&ie=UTF-8

Any advise and explanation would be appreciated!

seattlecyclone

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Re: 401K with high fees and no match vs taxable Vanguard account?
« Reply #1 on: October 30, 2017, 05:52:48 PM »
Remember that you can roll the 401(k) into a Vanguard IRA as soon as you quit, so the high fees aren't forever. The tax benefits of a 401(k) generally outweigh high plan fees as long as you plan to leave that job within a decade or so.

MDM

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chasesfish

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Re: 401K with high fees and no match vs taxable Vanguard account?
« Reply #3 on: October 31, 2017, 04:29:57 AM »
At $40,000 in income, its probably a wash.  Are you in a state with income taxes? When you get past the 15% income tax bracket, you probably have to suck it up and use the 401k.

My wife had an awful Simple IRA, but we had to use it because we were in a 25% federal, 6% state bracket.

Acastus

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Re: 401K with high fees and no match vs taxable Vanguard account?
« Reply #4 on: October 31, 2017, 12:25:42 PM »
Check with your benefits group or service. Many mutual funds that charge an upfront load wave it for institutional customers. I know this is common for Fidelity, and American may need to match them. You will not find this from American public info. You need to find someone who understands your plan.