Author Topic: Question of Fees on Deferred Comp Plan  (Read 353 times)

tophdna

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Question of Fees on Deferred Comp Plan
« on: March 15, 2017, 04:23:37 PM »
I'm curious about fees for my deferred comp plan at work 457 plan. I'm matched $100 dollars a month right now which I put in $100. I invest in BKTSX which is a total stock market index fund with a low ER. My question is over the DEferred comp plan fees. I took this from their website:


There are different types of fees for your 457(b) Plan account. They are:
Administrative Fees
Investment Operating Expenses (which will vary by investment option)
Redemption fees on certain transfers, redemptions or exchanges, which may be imposed by the fund
Optional Service Fees
Administrative Fees
The Plan will assess an administrative fee, based on the following schedule, which will be assessed quarterly and will be disclosed on the Transaction Detail section of your quarterly statement under the Withdrawals/Expenses heading.

The annual fee is 0.18% of the first $50,000 in your account, with a minimum fee of $10 per year and a maximum of $90. Every quarter, all participants will be assessed $2.50 up to a balance of $5,555.56, with 0.045% charged on balances from $5,555.57 up to $50,000.

The minimum quarterly fee is $2.50; the maximum is $22.50. If your balance exceeds $50,000, you are charged the maximum fee of $90 per year, or $22.50 per quarter, but you will pay nothing on the balance of $50,000.01 and above.

EXAMPLES
For a $10,000 balance:
You'll be charged $2.50 every quarter on the balances up to $5,555.56. The remaining $4,444.44 will be charged a fee of 0.045%, or $2 ($4,444.44 x 0.00045 = $2).
The total charged on the $10,000 balance will be $4.50 per quarter.
For a $100,000 balance:
You'll be charged $2.50 every quarter on the balances up to $5,555.56. Additionally, $44,444.44 will be charged a fee of 0.045%, or $20 ($44,444.44 x 0.00045 = $20). There is no fee for the portion of the balance above $50,000.
The total charged on the $100,000 balance will be $22.50 per quarter.

Does that seem like a heavy fee to you guys? This is not including my ER. I'm just curious what you think. Is it worth it to invest anymore into my 457 plan other than the match?

MDM

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Re: Question of Fees on Deferred Comp Plan
« Reply #1 on: March 15, 2017, 10:22:19 PM »
1) Does that seem like a heavy fee to you guys?
2) Is it worth it to invest anymore into my 457 plan other than the match?
1) No.
2) Yes.

See To 401k or not to 401k? That is the question.

VoteCthulu

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Re: Question of Fees on Deferred Comp Plan
« Reply #2 on: March 16, 2017, 12:37:58 PM »
$90/yr (your max fee) is more than my 401k plan charges, but I would still pour as much savings as I could into it. You can calculate how much tax saving your contributions give and you might be surprised how little their fee is on comparison. 

Proud Foot

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Re: Question of Fees on Deferred Comp Plan
« Reply #3 on: March 16, 2017, 01:05:31 PM »
That doesn't seem heavy at all.  With a max of $90 its only 0.09% with a $100k balance and as a percent will only go down as your balance grows.

rubybeth

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Re: Question of Fees on Deferred Comp Plan
« Reply #4 on: March 16, 2017, 05:46:20 PM »
Fees seem low to me. The beauty of the 457b for early retirement is the lack of an age requirement for distribution.
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MustacheAndaHalf

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Re: Question of Fees on Deferred Comp Plan
« Reply #5 on: March 16, 2017, 06:39:11 PM »
Yes, 0.83% an expensive fee when you have just $1200 the first year with a $10 minimum fee.  At this rate, after 15 years your contributions will add up to what some people contribute every year.  It's great you're getting the employer match, but I'd encourage you to save more than $1200/year towards retirement.

Note with $18,000 in the account, the fees look more like the advertised 0.18%.  And even with the BlockRock index fund's fee of 0.04%, you wind up with only 0.22% in expenses each year.  That's far better than the average mutual fund.

Just ballpark with the 4% rule to see how far short an approach might be.  For example, if you save $1200/year for 20 years, that's $24,000 plus growth.  Let's just say the account reaches $40,000 after 20 years, and you look at the 4% guideline.  4% of $40,000 is $1600/year.  So to retire with $40,000 you would need to live on $125/month.  Based on that you know your retirement savings is very far off.