Author Topic: Husband's 401k through TransAmerica  (Read 1140 times)

avedaprincess

  • 5 O'Clock Shadow
  • *
  • Posts: 32
Husband's 401k through TransAmerica
« on: June 12, 2018, 06:40:03 AM »
Hello! My husband has a 401k through TransAmerica. I've been reading a few posts about the high fees for TransAmerica, but I don't think there is much we can to because this is the plan the employer chose. There is a discretionary match at the end of the year by the employer.

My question is: Should we still contribute to the max amount? Or would extra money for investing be better put into a Vanguard investment account.
I am pretty new to MMM and I want to make the best decision right now...

Thank you for reading!

chaskavitch

  • Bristles
  • ***
  • Posts: 461
  • Age: 32
  • Location: Fort Collins, CO
Re: Husband's 401k through TransAmerica
« Reply #1 on: June 12, 2018, 07:01:50 AM »
What, exactly, is this "discretionary match"?  Is it based on how well the company does?  Is a match guaranteed and just the percentage changes, or is there a chance there's no match at all? 

Do you know what options there are within the plan?  TransAmerica is the 401k provider, but you should have some funds within the TransAmerica platform to choose among.  When you're comparing fees to the 0.04% you can get at Vanguard, EVERYTHING seems really expensive, but depending on how high the fees are on your funds, it's possibly/probably still worth it to contribute for the tax savings, especially if there is a match.

Finally, do you have any other retirement accounts to contribute to?  IRA, Roth IRA, another 401k through your employer?  If those have less expensive options, you may be better off maxing out those accounts before contributing above the match % to your husband's 401k.

avedaprincess

  • 5 O'Clock Shadow
  • *
  • Posts: 32
Re: Husband's 401k through TransAmerica
« Reply #2 on: June 12, 2018, 07:27:51 AM »
@chaskavitch thank you for replying!

Yes, the match is based on how well the company does at the end of the year. It can be anywhere from $2k-4k. And yes- there is a chance that there is no match at all.

I don't know what options are within the plan. I can definitely log on and check out if we have a choice, or if we need to go with what the employer has chosen.

Sadly, the company I work for is small, so they don't offer retirement options. I do have my own IRA that I contribute to and I do have a small 529 plan for my child.

MustacheAndaHalf

  • Handlebar Stache
  • *****
  • Posts: 1159
Re: Husband's 401k through TransAmerica
« Reply #3 on: June 12, 2018, 08:53:34 AM »
Actually a 401(k) program has a legal obligation to look to lower expenses.  There's even a Supreme Court case where a company didn't try to lower fees, and as a result the Supreme Court decided their ongoing failure meant there wasn't a time limit on suing them for their breach of fiduciary duty.  Tibble v Edison:
http://www.scotusblog.com/case-files/cases/tibble-v-edison-international/

So there's the possibility of waiting and suing later, or advising the employer they might get sued for not trying to lower expenses.  You could also be constructive by asking why this 401(k) plan charges higher fees than if Vanguard ran your company plan.

chaskavitch

  • Bristles
  • ***
  • Posts: 461
  • Age: 32
  • Location: Fort Collins, CO
Re: Husband's 401k through TransAmerica
« Reply #4 on: June 12, 2018, 09:08:50 AM »
@chaskavitch thank you for replying!

Yes, the match is based on how well the company does at the end of the year. It can be anywhere from $2k-4k. And yes- there is a chance that there is no match at all.

I don't know what options are within the plan. I can definitely log on and check out if we have a choice, or if we need to go with what the employer has chosen.

Sadly, the company I work for is small, so they don't offer retirement options. I do have my own IRA that I contribute to and I do have a small 529 plan for my child.

Is it a true match in that they'll only contribute if he's contributed a certain amount?  If he has to contribute to get any of the money at the end of the year, I'd say contribute up to the maximum amount you could get matched, and try to put it in the lowest-fee fund within your choices, generally, unless it's a money market account.

Maxing your IRA and opening one for your husband as well may be your best first choice.  If you go through Vanguard, you can get a Target Date Retirement fund for a fee of around 0.14%, or just put money straight into VTSAX at 0.05%.  I know Fidelity has some decently priced funds as well, but I've only used them for employer plans, so I don't have any first hand input on their personal accounts.  I don't know if a Roth IRA or a traditional is the better choice, since it depends on your income and I don't have a firm grasp of the optimal tipping point, but there have been a lot of discussions about that on these forums.

PDXTabs

  • Pencil Stache
  • ****
  • Posts: 509
  • Age: 35
  • Location: Vancouver, WA, USA
Re: Husband's 401k through TransAmerica
« Reply #5 on: June 12, 2018, 09:22:58 AM »
Hey, I have one of those! As per Bogleheads wiki:

Quote
A reasonable rule-of-thumb is to consider investing in a taxable account if the product of the extra costs and the number of years you will stay in the plan exceeds one and a half times your combined federal and state tax rates on qualified dividends over your working career. That is, if you pay 1.70% expenses rather than 0.20%, and you pay 15% federal tax on qualified dividends, plus 5% state tax, you should still invest in the plan unless you are reasonably certain that you will stay with the employer for more than 20 years for a net loss of 30% (actually 26% because of compounding). If you pay no state tax, you should still invest in the plan unless you are reasonably certain you will stay more than 15 years.
401k Expensive or mediocre choices

So I choose to max it out, even with no match.

chaskavitch

  • Bristles
  • ***
  • Posts: 461
  • Age: 32
  • Location: Fort Collins, CO
Re: Husband's 401k through TransAmerica
« Reply #6 on: June 12, 2018, 09:34:10 AM »
Hey, I have one of those! As per Bogleheads wiki:

Quote
A reasonable rule-of-thumb is to consider investing in a taxable account if the product of the extra costs and the number of years you will stay in the plan exceeds one and a half times your combined federal and state tax rates on qualified dividends over your working career. That is, if you pay 1.70% expenses rather than 0.20%, and you pay 15% federal tax on qualified dividends, plus 5% state tax, you should still invest in the plan unless you are reasonably certain that you will stay with the employer for more than 20 years for a net loss of 30% (actually 26% because of compounding). If you pay no state tax, you should still invest in the plan unless you are reasonably certain you will stay more than 15 years.
401k Expensive or mediocre choices

So I choose to max it out, even with no match.

Good point.  Here's a link to the Investment order sticky https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

This ordering is appropriate for investors in the US.
         
Differences of a few tenths of a percent are not important when applicable for only a few years (in other words, these are guidelines not rules).            
                              
WHAT            
0. Establish an emergency fund to your satisfaction            
1. Contribute to your 401k up to any company match            
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.            
3. Max HSA             
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level            
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA deduction, swap #4 and #5)            
6. Fund a mega backdoor Roth if applicable.         
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield.            
8. Invest in a taxable account and/or fund a 529 with any extra.   

myemail1045

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Husband's 401k through TransAmerica
« Reply #7 on: June 12, 2018, 10:45:15 AM »
Has anyone used "In-service 401k rollover"? I just learned about it. This is an interesting topic since my wife's employer offers TransAmerica 401K with lot of fees.

Below is what i found on internet at (https://www.401krollover.com/what-is-in-service-401k-rollover-plan/)

"What is an in-service 401K rollover?
An in-service 401K rollover is exactly what it’s called, an opportunity to roll your 401K assets into an individual account while you still work for your employer. This would be in contrast to an orphan 401K rollover which is where you roll your retirement assets from a former employer into a new employer’s 401K or into an IRA plan.

According to the Profit Sharing Council of America (PSCA), up to 77% of 401K plans include a provision for in-service 401K rollovers. Many of these only allow plan rollovers when a worker reaches a triggering event such as reaching retirement age, disability, plan termination or reaching the age of 59 ½ years.

There are some plans though that offer the ability for an in-service 401K rollover without these triggering events, basically rolling your retirement assets into an IRA whenever you choose. There may be other requirements to an in-service 401K rollover like holding the assets in your 401K for at least two years or having the plan itself for at least five years.

Get a copy of your employer’s summary plan description (SPD) for your 401K plan and look for any rules on in-service 401K rollovers. You can also ask your 401K plan advisor or the administrator though they might not want to tell you that assets can be rolled over to an outside IRA you control."

myemail1045

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Husband's 401k through TransAmerica
« Reply #8 on: June 12, 2018, 11:22:32 AM »
what i mean to say is-
is it possible to rollover 401k into IRA account every year? (without changing employer) if so has anyone done it?

avedaprincess

  • 5 O'Clock Shadow
  • *
  • Posts: 32
Re: Husband's 401k through TransAmerica
« Reply #9 on: June 12, 2018, 04:49:07 PM »
@chaskavitch - confirmed this afternoon that the match is a percentage across the board to all employee participants...could be 2% or it could be 5%...no minimum contribution for the match...

PDXTabs

  • Pencil Stache
  • ****
  • Posts: 509
  • Age: 35
  • Location: Vancouver, WA, USA
Re: Husband's 401k through TransAmerica
« Reply #10 on: June 12, 2018, 05:12:52 PM »
what i mean to say is-
is it possible to rollover 401k into IRA account every year? (without changing employer) if so has anyone done it?

I have never done it, but I have read about it (because I wish I could). You can, but you need to be 59.5 years old.

Per IRS rules this is not permitted for employees age 59.5 or younger, for their elective employee pretax or Roth contributions; for participants age 59.5 or older, a plan may allow it. A plan may, however, allow for in-service distributions of the employer matching contributions and of the employee's after-tax 401(k) contributions.
- Bogleheads wiki

maizeman

  • Magnum Stache
  • ******
  • Posts: 2546
Re: Husband's 401k through TransAmerica
« Reply #11 on: June 12, 2018, 05:25:38 PM »
what i mean to say is-
is it possible to rollover 401k into IRA account every year? (without changing employer) if so has anyone done it?

I have never done it, but I have read about it (because I wish I could). You can, but you need to be 59.5 years old.

Per IRS rules this is not permitted for employees age 59.5 or younger, for their elective employee pretax or Roth contributions; for participants age 59.5 or older, a plan may allow it. A plan may, however, allow for in-service distributions of the employer matching contributions and of the employee's after-tax 401(k) contributions.
- Bogleheads wiki

Going through the link it sounds like that's the rule for an in service distribution rather than an in service rollover.

My understanding is that 401k plans can be set up to allow in service rollovers to other tax deferred retirement accounts (like an IRA), but there is no guarantee that any particular plan will do so (sort of like the mega backdoor roth issue). So you may have to either ask someone in HR or review the plan documents to know for sure.
« Last Edit: June 12, 2018, 06:00:05 PM by maizeman »

teecup

  • 5 O'Clock Shadow
  • *
  • Posts: 16
Re: Husband's 401k through TransAmerica
« Reply #12 on: June 13, 2018, 10:13:47 AM »
@chaskavitch thank you for replying!

Yes, the match is based on how well the company does at the end of the year. It can be anywhere from $2k-4k. And yes- there is a chance that there is no match at all.

I don't know what options are within the plan. I can definitely log on and check out if we have a choice, or if we need to go with what the employer has chosen.

Sadly, the company I work for is small, so they don't offer retirement options. I do have my own IRA that I contribute to and I do have a small 529 plan for my child.

Hi, we have TransAmerica as well and they have Vanguard Target Date Retirement options there. My understanding is, TA fee is $25/yr + fund fees so not too bad (at least for me). HTH

bognish

  • Stubble
  • **
  • Posts: 210
Re: Husband's 401k through TransAmerica
« Reply #13 on: June 14, 2018, 10:00:55 AM »
I am a controller for a smallish company and on the 401k plan committee. We just switched our plan administrator to TransAmerica about 2 years ago. Your husbands plan might have higher fees or different fund selection than ours, I don't think Transamerica is necessarily a bad choice. The fees will be higher than an individual Vanguard fund because there are more regulations, reporting and administration that go along with running a 401k plan. Depending on the company size and the amount of total assets in the plan a company's options can be fairly limited on who will want to be the administrator and the fees go down the bigger the plan. For my company Transamerica had the best offering and lowest fees. Vanguard did not even bid and the Fidelity rep did not show up to his presentation time when we were shopping. We are much smaller than their average plan.

So in short, look at the plan funds and expenses before deciding to skip it. I put all my 401k money into the lowest fee index fund and diversify through other cheaper investment accounts.

avedaprincess

  • 5 O'Clock Shadow
  • *
  • Posts: 32
Re: Husband's 401k through TransAmerica
« Reply #14 on: June 19, 2018, 06:32:32 AM »
Thank you to all who have replied, I very much appreciate it and have started looking around on the 401k website for options. Thank you again!

ISawTheLight

  • 5 O'Clock Shadow
  • *
  • Posts: 23
Re: Husband's 401k through TransAmerica
« Reply #15 on: June 19, 2018, 08:33:18 AM »
Our HR group just sent out our 401k's annual 404(a) disclosure a couple of weeks ago.  Ask your husband to get this from his HR group.  It is a required disclosure, so he may already have it (or, more likely, it will be available when he logs into his 401k account online).  The 404(a) disclosure shows all of the fees that are being charged by the 401k plan and each of the investments that are offered inside the plan.  You should be able to make a better informed decision once you're armed with this information.


avedaprincess

  • 5 O'Clock Shadow
  • *
  • Posts: 32
Re: Husband's 401k through TransAmerica
« Reply #16 on: June 27, 2018, 07:15:13 AM »
Thank you. I've requested the plan booklet. ALSO, apparently, the company switched to MassMutal this year (!). So, they're sending one out. Anyway, I had my husband increase his contributions for now, so we're putting away about 800/month. I still think we need more but I am still trying to make a budget and stick to it. Thank you for all of your responses. (I find learning about this pretty enjoyable!)

chaskavitch

  • Bristles
  • ***
  • Posts: 461
  • Age: 32
  • Location: Fort Collins, CO
Re: Husband's 401k through TransAmerica
« Reply #17 on: June 27, 2018, 07:22:39 AM »
Thank you. I've requested the plan booklet. ALSO, apparently, the company switched to MassMutal this year (!). So, they're sending one out. Anyway, I had my husband increase his contributions for now, so we're putting away about 800/month. I still think we need more but I am still trying to make a budget and stick to it. Thank you for all of your responses. (I find learning about this pretty enjoyable!)

Hey, $800 a month is nothing to sneeze at!  That's a great start.  Good luck getting everything figured out :) 

Car Jack

  • Pencil Stache
  • ****
  • Posts: 719
Re: Husband's 401k through TransAmerica
« Reply #18 on: June 27, 2018, 07:29:20 AM »
I had a Mass Mutual 401k at my last job.  It was relatively horrible but I knew I wouldn't be at the job forever, so just chose whatever fund had the absolute lowest ER.  From memory, I believe in our plan, it was some mid cap fund at an ER of 0.41% and then the plan had something like 0.1% management fee added.

I think it would be wise to find out how the match is given.  I've worked at companies where similar kinds of contributions by the company was deposited into the employee's 401k near the end of the year regardless of employee contributions, so long as the account was open with the minimum contribution made.  So someone could have put $100 in their 401k and received $5000 in company profit sharing.  Of course, the more common is to match some % of the first so much that the employee puts in. 

In service rollover plans are pretty rare.  If you're not close to 59 1/2, you likely can't do it.  But it's worth looking into.  There are plans that won't allow it even if you are 59 1/2.

avedaprincess

  • 5 O'Clock Shadow
  • *
  • Posts: 32
Re: Husband's 401k through TransAmerica
« Reply #19 on: June 27, 2018, 06:06:16 PM »
thank you ! i'll likely post back when I receive more plan info. :)  thanks again for all of the help!

avedaprincess

  • 5 O'Clock Shadow
  • *
  • Posts: 32
Re: Husband's 401k through TransAmerica
« Reply #20 on: June 29, 2018, 05:13:57 PM »
I'm back! I found out that the plan (defaults maybe?) to the American Funds 2050 target date retirement fund. 1st Q rate of return shows 2.67%

It looks there are some Vanguard funds available. I would like a larger number for the rate of return...

Which ones do you guys use in your 401K? H had been with company for 7 years...total contributions from employers in that amount of time has been 5k. So, the end of year employer contributions has either been a little over or a little under 1k per year (again, only based on how well the company does during the year)..


TY!