Author Topic: 401k plan with class R2 funds  (Read 1048 times)

frugalnacho

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401k plan with class R2 funds
« on: September 16, 2019, 07:47:37 AM »
I am eligible to enroll in my works 401k plan.  It's through american funds, and all the funds are class R2.  The lowest ER is 1.36% for a bond fund, and the AMCAP index fund (S&P 500) has an ER of 1.46%. 

Are these ER absolutely outrageous?  They seem much higher than I want to pay, and much higher than is necessary, but still not the worst I've dealt with. The only person that knows anything about it at all is the lone HR person, and she doesn't seem to actually know anything about the plan.  When I asked for information from her she said she has absolutely no clue about anything and gave me the contact information for the investment firm that administers our plan.  I think the likelihood of getting them to change is low because they obviously don't care about anything 401k related, and just threw their hands up and let the investment firm handle all the complicated investing matters for them, even though that means everyone is getting raked over the coals while they make a healthy profit.

Similar situation with our medical and dental insurance which are outrageously priced.  The dental insurance is $600+ for a DHMO, and if I wanted to keep my current dentist I could sign up for the PPO and pay $1,800+/yr in premiums.  $1,800! For dental insurance! I've never even had $1,800 worth of retail dental work done, why would I ever pay that as a yearly premium? It's fucking insane.  I declined the dental insurance and will just be purchasing a program through my dentist for $300/yr to cover cleanings and x-rays for me and my wife, and the plan comes with reasonable retail prices in case we need fillings or any other work done.  I expect we are going to come out way ahead of my employer dental insurance even if we have to have a bunch of dental work done.   
 

bacchi

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Re: 401k plan with class R2 funds
« Reply #1 on: September 16, 2019, 08:01:56 AM »
Yeah, those fees are outrageous.

I think you're right. Your company picked the cheapest plan provider out there and they're making their profit from the investors.

Sanitary Stache

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Re: 401k plan with class R2 funds
« Reply #2 on: September 16, 2019, 08:12:08 AM »
The 401k at my work has American funds class R-4 shares and the ERs are about half of what you describe.
Does your employer match a percentage?

frugalnacho

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Re: 401k plan with class R2 funds
« Reply #3 on: September 16, 2019, 08:38:09 AM »
I get matched dollar for dollar for the first 3%, and 50 cents per dollar for the next 2%.  So essentially 4% matching.  It's safe harbor matching so it's 100% vested immediately which is nice.

After talking with HR it seems many employees don't even participate, and no one is concerned with fees.  By a wide margin the biggest concern among all the employees is the ability to take a loan out of the 401k, so that is what I am dealing with at this company.

Sanitary Stache

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Re: 401k plan with class R2 funds
« Reply #4 on: September 18, 2019, 11:15:19 AM »
Maybe suggest the HR team and company president watch

https://www.pbs.org/wgbh/frontline/film/retirement-gamble/