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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: DanBrewMan on August 23, 2013, 08:03:32 AM

Title: New 401(k) options - no s&p 500 :(
Post by: DanBrewMan on August 23, 2013, 08:03:32 AM
I am of the thought that I don't need some wallstreet douche picking funds for me - just give me the index.  That being said, I just switched jobs and there is no simple s&p 500 fund, only a bunch of funds with expense ratios over 0.6% and then a "passive" fund that includes a mix of indices.  The expense ratio for this fund is 0.14, so obviously I'd like to stick to that one.  My question for the MMM community is:

1. is it worth putting any extra (passed the required amount for company matching) into this fund?

2. Is this a decent index fund?  Here's are the indices in the fund:

30% ^RUA
30% ACWX
40% Barclays Capital US Aggregate Index

Thank you in advance.
Title: Re: New 401(k) options - no s&p 500 :(
Post by: Louisville on August 23, 2013, 08:52:03 AM
I'd say this is an excellent investment vehicle when considered for itself. Certainly blows away managed funds with high expense ratios, in my opinion.
Combined with already existing retirment savings, how does it fit in with your overall target asset allocation? If this is your only retirement money, it may be a bit heavy on bonds if you're under 50.
Title: Re: New 401(k) options - no s&p 500 :(
Post by: StarryC on August 23, 2013, 10:18:21 AM
Oh, I have a similar question.

The most "index" like fund I see on my company's list is "Black Rock S&P 500"  BSPIX.  The expense ratio is .24.  That is better than the rest of the options, but doesn't exactly seem "good."  The company doesn't match, but makes "safe harbor" contributions and sometimes voluntary contributions.  It seems to me that the only benefit of using the 401K as opposed to a lower expense fund is the tax benefits, which increase my contribution by 75%. (i.e. lower paycheck $100, contribute $175 to the fund for example, 200/350, 300/525 and so on)  Is the tax benefit enough to make up for the difference between a .24 expense ratio and a .15 expense ratio I could probably get someplace else?  I think so, but I'm not sure how I'd figure it out.
Title: Re: New 401(k) options - no s&p 500 :(
Post by: salmp01 on August 23, 2013, 10:32:51 AM
Quote
Is the tax benefit enough to make up for the difference between a .24 expense ratio and a .15 expense ratio I could probably get someplace else?  I think so, but I'm not sure how I'd figure it out.

The difference between the .24 fund and a .15 fund that you could get somewhere else is 9 basis points 1% of .09 = .0009.  If you have 100k invested in the .24 fund the added expense will consume $90/year.  So the added tax benefit of contributing to your 401k probably makes it worth your while to put as much as you can in your 401k
Title: Re: New 401(k) options - no s&p 500 :(
Post by: DanBrewMan on August 23, 2013, 10:54:04 AM
I'm 26 and have just started investing, so I don't think a heavy bond fund is best right now.  My current thinking is to put enough into the 401k for the match and then max out other, stock-heavy or dbt-reducing, options before adding any more to the 401k.
Title: Re: New 401(k) options - no s&p 500 :(
Post by: kh on August 23, 2013, 11:06:43 AM
An IRA may be another good option: tax benefits + more flexibility in investments. The annual limits are lower, but that may not matter to you right now. Vanguard has good options here.