Author Topic: New Job, Bad 401K Options  (Read 688 times)

ministashy

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New Job, Bad 401K Options
« on: October 29, 2018, 08:32:45 PM »
So I'm in the same boat as many others--I'm starting with a new employer, and I want to sign up for their 401K plan, even though they don't offer a match until you've been with them a year.  Obviously I want to shelter as much as I can in my 401K account, but all the investment options are pretty awful.  This is what they offer:

SEI Instl Mngd Tr Multi-Asset Accum F   
SEI Instl Multi-Asset Income F
SEI Instl Mgd Multi-Asset Infl Mngd F   
SEI Instl Managed Trst Multi-Strat Alt F
SEI Daily Income Trust Government F
SEI Instl Managed Trust Lg Cap F
SEI Instl Managed Trust Small Cap F
SEI Instl Managed Trust RE F
SEI Instl Managed High Yld Bond F
SEI Instl Intl Trust Emerg Mkts Eqty F
SEI Instl Intl Trust Intl Equity F
SEI Instl Managed Trust Large Cap Gr F
SEI Instl Managed Trust Core Fixed F

As you can see, no index funds are on offer.  Expense ratios range from .46% (for their money market fund) to 2.02%.

Should I just tuck my money into the money market, since it has the lowest expense ratio, even if it's not likely to gain much with the market?  Or is there another fund in this list that might actually be worth paying a higher expense ratio for?  Am I missing a diamond anywhere in this list of turds?  Any advice is welcome!

seattlecyclone

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Re: New Job, Bad 401K Options
« Reply #1 on: October 29, 2018, 08:59:13 PM »
What's the expense ratio on the large cap stock fund? That's usually one of the cheaper ones aside from money market which is basically cash and probably not what you want to invest in.

ministashy

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Re: New Job, Bad 401K Options
« Reply #2 on: October 29, 2018, 09:12:13 PM »
.93 and .98%, looks like.  :(

seattlecyclone

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Re: New Job, Bad 401K Options
« Reply #3 on: October 30, 2018, 12:36:21 AM »
If you don't plan to stay at this employer for multiple decades, it's still probably a win to take the tax savings from 401(k) contributions even with expense ratios that high. Plan to roll over to your own IRA when you next change jobs.

reeshau

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Re: New Job, Bad 401K Options
« Reply #4 on: October 30, 2018, 06:55:09 AM »
Stunted growth is better than no growth.  While a .46% expense ratio sounds low, given the return of a money market, it is 25-50% of your return.  (assuming the fund makes 1-2%)  A 2% ratio, put on a stock fund making 10%, is 20% of earnings.  Don't let the tail wag the dog--all these expenses are high, there is no place to hide, so invest according to your plan and appetite for risk.  Looking at expenses vs. performance *within an asset class* is another thing.

And, as @seattlecyclone said, you get the tax break anyway.  Consider that a performance boost for now, if not a match, to help swallow the bitter expenses pill.

ministashy

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Re: New Job, Bad 401K Options
« Reply #5 on: October 30, 2018, 08:21:26 PM »
I see what you guys mean about ER vs return.  This is probably a dumb question, but do I just pick the best historical performer out of the bunch that fits my current asset allocation?  That seems risky, but I'm not sure what other criteria I could use here...

SubL stache

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Re: New Job, Bad 401K Options
« Reply #6 on: October 30, 2018, 11:13:48 PM »
Don't do the money market, that will be dismal returns.

The large cap isn't bad at .98%, most every 401k has inflated ERs.

I have Vanguard index options in my John Hancock 401k, funds that are .04%-.14% within Vanguard and JH charges .68%-.83%.

What a ripoff, does anyone know if Vanguard offers 401k options itself, I'm close to moving into an ownership role with the company - I may then have the power to lobby for a change.

mies

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Re: New Job, Bad 401K Options
« Reply #7 on: October 31, 2018, 04:03:44 AM »
Don't do the money market, that will be dismal returns.

The large cap isn't bad at .98%, most every 401k has inflated ERs.

I have Vanguard index options in my John Hancock 401k, funds that are .04%-.14% within Vanguard and JH charges .68%-.83%.

What a ripoff, does anyone know if Vanguard offers 401k options itself, I'm close to moving into an ownership role with the company - I may then have the power to lobby for a change.

Vanguard does 401(k) plans. My company has its plan through Vanguard which is nice because I can see my 401(k), Roth IRA, and taxable accounts all in one place.

MustacheAndaHalf

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Re: New Job, Bad 401K Options
« Reply #8 on: October 31, 2018, 08:36:37 AM »
I'm starting with a new employer, and I want to sign up for their 401K plan, even though they don't offer a match until you've been with them a year.
It's probably still worth the tax benefit of the plan, but only because you will probably find another job within 5 years.  If you work there 20 years, that first year's money won't pay off: the fees subtract -26% from returns, while long-term capital gains taxes only subtract -15% (for most people).  In the second and later years the company match more than makes up for the fees.

If you expect to change jobs within 5 years, I'd invest in their plan with the hope that you can switch to something better later.  Who knows, the company might even realize the risk it's taking by failing in it's fiduciary responsibility, and decide to offer passive index funds.