Since finding this community last year, so much has changed with regards to what I thought I knew about investing, spending, and life in general. I cannot thank MMM and you guys enough. Please don’t let my post count fool you; I am an avid reader of the forums, I just don’t post yet. I prefer to absorb the wisdom here for a while before opening my big trap and adding my 2 cents.
MMM and this community helped turn me from a small % 401k contributor to max, no other accounts to a fully funded tIRA (2015 and 16), a taxable account, and from a 5 figure savings account rotting in a bank to a few months safety net, letting those dollars work for me instead of wasting away.
The reason for this post is, the more I read and learn the more I look at my 401k choices and think “damn, these stink!” I composed an email to my HR director which I have copied below, valiantly (but briefly) trying to see what I could do to have some additional choices made available. We’ve recently moved from Mercer to Charles Schwab. Disclaimer: I am a noob so some of the verbiage will probably read rather rudimentary:
I would like to inquire about having more fund choices available to employees now that we’ve moved to Schwab.
When it comes to expense ratio, our limited choices are what I consider very expensive. For example, the target date funds have an expense ratio of .75%. For an account with $100,000 this equates to a yearly expense of $750. I understand that this pays the fees for the fund manager, etc, but it is quite exorbitant compared to other choices Schwab offers. The most expensive choice in our lineup (ARTMX) sits at a whopping 1.2%, or $1200 per year cost to the employee per $100,000 of holdings.
There is one shining light in our choice lineup, and that is the Vanguard Institutional Index (VINIX) which is a “passive” fund and sits at a very appealing .04%, or $40 per $100,000 per year. The Vanguard Company has no stockholders or outside owners to answer to (read: make a profit for) so they can offer their funds at a much lower cost, which allows us to keep more of our money we elect to put into 401k.
Charles Schwab has many fund choices that resemble VINIX, and it would be great if employees had a more diversified choice. The following are some examples and their respective expenses:
SWPPX-- Schwab S&P 500 Index Fund. 0.09%
SWTSX-- Schwab Total Stock Market Index Fund 0.09%
SNXFX Schwab 1000 Index Fund. 0.29%
SWSSX Schwab Small-Cap Index Fund. 0.17%
SWISX Schwab International Index Fund 0.19%
There are many others offered by Schwab that could be included for the more knowledgeable employee that would prefer to manage their 401k fund choices and % allocations, rather than pay someone else to do it for them.
If you would like me to add more information to this, please just let me know.
My email was sent to our corporate Investment Advisor and the reply I received was:
“Please let him know that the Investment Committee acknowledges and appreciates his input and we have added this topic to our next meeting agenda for discussion. Every quarter, we are constantly reviewing our investment funds against benchmarks and discussing alternatives that would serve the best interests of all participants. Our professional Investment Advisor was impressed with his observations and engagement in the process. He called employee_001 a true “indexer” which is just fine.
I will follow-up with you after our next quarterly Investment Committee meeting scheduled in Feb. and let you know what was discussed. At that time, I would be happy to schedule a conversation with employee_001 if he’s interested.”
Are there any words of advice on where to go from here to further the cause? I am posting this not only to get assistance in my plight, but to help others like me that would like to see their work place 401k’s fund lineup improved and more along mustachian lines.
Thank you in advance.
Haimon’s Mustache
