Author Topic: Recent Company 401K Change - New Self Directed Option  (Read 1188 times)

Kayano_55

  • Stubble
  • *
  • Posts: 13
Recent Company 401K Change - New Self Directed Option
« on: April 28, 2013, 11:55:37 AM »
Hi all,
My company recently added the option of a self-directed 401K.  The set up of the plan currently incurs a $100/year charge for a brokerage account via TD Ameritrade.  My initial thought was that this is pretty cool, as it gets me out of the somewhat lame (and expensive) funds I have to choose from currently.  However, my plan would be to use the self-directed account to buy Vanguard ETFs which could end up racking up some significant brokerage fees every month for the monthly dollar cost averaging I would do. 

Questions:
1.) Still worth doing in spite of the brokerage fees and $100/year charge?
2.) Should I stick with my set up  i.e. non-self directed (I'm at a personal return of 14% - awesome, but I know I'm getting jacked with high fees on these mutual funds)

Update - I just double checked and it appears that Vanguard has many ETF options (no-commission) available at TD Ameritrade, so maybe the biggest issue is paying $100/year for the brokerage account?

Curious what you all think?

Thanks!
« Last Edit: April 28, 2013, 03:10:31 PM by Kayano_55 »

TheNessaEmpire

  • Stubble
  • *
  • Posts: 10
  • Location: Florida
Re: Recent Company 401K Change - New Self Directed Option
« Reply #1 on: April 28, 2013, 01:34:20 PM »
That is an appealing option! I would love the option of a self directed account since I wouldn't be stuck with the set of mutual funds I have access to now.

If you max out your 401k at 17500 this year that means you're paying the 100 fee in this way:
That fee chopped up into a typical paycheck period means you'd pay 3.85 in fees while putting away 673 in your 401k every two weeks.
If you're putting away 300 per check into your 401k and the fee stays the same 3.85 might not be as bad a percent if you have a large enough existing 401k balance to move over.

TD Ameritrade has many Vanguard ETFs that are commission free and keeping very low expense ratios could make this a winner compared to what you are currently invested in. You may have great personal returns but the fees you pay for the mutual fund take away a piece of that.

To compare apples to apples, figure out what you're currently paying in custodian fees, expense ratios or loads to compare to how the 100/fee and Vanguard expense ratios would stack up. Keeping costs low is paramount in 401k savings.

Kayano_55

  • Stubble
  • *
  • Posts: 13
Re: Recent Company 401K Change - New Self Directed Option
« Reply #2 on: April 28, 2013, 02:54:50 PM »
Yeah, the more I look at it, the more it makes sense based on the fees of the other funds I can choose from in the non self-directed portion of my 401K.  I forgot to mention that they will also let us do a ROTH 401K as well.  So I could max out the $17,500 per year (with after tax dollars) and have it grow tax free in self-directed investments i.e. Vanguard with commission free ETFs (assuming the gov doesn't change the structure of the Roth - blah, blah, blah) ;-)  If I didn't need the pre-tax deduction as much as I do, I'd be all over the Roth version of this.   
« Last Edit: April 28, 2013, 03:11:37 PM by Kayano_55 »

RobbyJ

  • Handlebar
  • ***
  • Posts: 202
Re: Recent Company 401K Change - New Self Directed Option
« Reply #3 on: April 29, 2013, 09:20:02 AM »
Hi all,
My company recently added the option of a self-directed 401K.  The set up of the plan currently incurs a $100/year charge for a brokerage account via TD Ameritrade.  My initial thought was that this is pretty cool, as it gets me out of the somewhat lame (and expensive) funds I have to choose from currently.  However, my plan would be to use the self-directed account to buy Vanguard ETFs which could end up racking up some significant brokerage fees every month for the monthly dollar cost averaging I would do. 

Questions:
1.) Still worth doing in spite of the brokerage fees and $100/year charge?
2.) Should I stick with my set up  i.e. non-self directed (I'm at a personal return of 14% - awesome, but I know I'm getting jacked with high fees on these mutual funds)

Update - I just double checked and it appears that Vanguard has many ETF options (no-commission) available at TD Ameritrade, so maybe the biggest issue is paying $100/year for the brokerage account?

Curious what you all think?

Thanks!

How much is the $100 fee, compared to the size of your portfolio?

What are the expense ratios on your current 401k?

What are the expense ratios on the comparable investments through the self directed?