Author Topic: New 401K Question  (Read 1645 times)

joeypants

  • 5 O'Clock Shadow
  • *
  • Posts: 20
  • Location: Washington
New 401K Question
« on: April 05, 2017, 08:42:26 AM »
Hi all,

Just a quick question my new employer is finally rolling out a 401K program at work, which I was excited about when I first heard of it! But I just got more details today, and I'm decidedly less enthusiastic now.

Some details: There is no employer match, and the funds are underwhelming to say the least.

There is a big list of funds, most from companies I've never heard of, and all of them have high expense ratios compared to Vanguard/Schwab/Fidelity. The best 2 of the list for my situation  (married, age 34, no kids yet)  and what I'm looking for (diverse index fund, similar to VFINX or VFIFX) are:

  • Nationwide S&P 500 Index (GRMAX) Expense ratio: .6%. This is by far the lowest ER on the list, but compared to something like VFINX, it seems underwhelming.
  • JPMorgan SmartRetirement 2050 (JTSAX) Expense ratio: 1.31%

Most of the rest of the options are small cap funds, emerging market funds, or a REIT.

My question(s): Considering that there is no employer match, is it even worth investing in one of the 2 funds listed above, given how high the ER is and how lackluster the performance is? I have a 401K from a previous employer (VFIFX)  with around $20K in it, can I potentially roll over everything I contribute to this new employer's 401K into my old 401K so that my money is in something that I like much better?

Thanks!

MDM

  • Walrus Stache
  • *******
  • Posts: 9413
Re: New 401K Question
« Reply #1 on: April 05, 2017, 11:31:53 AM »
Considering that there is no employer match, is it even worth investing in one of the 2 funds listed above, given how high the ER is and how lackluster the performance is?
At least for the S&P 500, "probably".  See To 401k or not to 401k? That is the question for more.

Quote
I have a 401K from a previous employer (VFIFX)  with around $20K in it, can I potentially roll over everything I contribute to this new employer's 401K into my old 401K so that my money is in something that I like much better?
Probably not, unless you leave the new employer.  Check the fine print in the plan, but usually you can't take it out while still employed.

joeypants

  • 5 O'Clock Shadow
  • *
  • Posts: 20
  • Location: Washington
Re: New 401K Question
« Reply #2 on: April 14, 2017, 11:25:37 AM »
Considering that there is no employer match, is it even worth investing in one of the 2 funds listed above, given how high the ER is and how lackluster the performance is?
At least for the S&P 500, "probably".  See To 401k or not to 401k? That is the question for more.

Quote
I have a 401K from a previous employer (VFIFX)  with around $20K in it, can I potentially roll over everything I contribute to this new employer's 401K into my old 401K so that my money is in something that I like much better?
Probably not, unless you leave the new employer.  Check the fine print in the plan, but usually you can't take it out while still employed.


Just bumping this real quick I did some digging and it turns out that the 2 funds I mentioned also have front-load fees of 5.75% and 4.5%, respectively. Which is outrageous.

With that information, seems like my best option is to skip the 401K and invest through my HSA and Roth IRA at this point... Uh, probably?

Thanks!

dandarc

  • Magnum Stache
  • ******
  • Posts: 3406
  • Age: 36
Re: New 401K Question
« Reply #3 on: April 14, 2017, 11:30:11 AM »
Front load on an S&P 500 index fund!?

Find another job.

Clean Shaven

  • Pencil Stache
  • ****
  • Posts: 801
  • Location: Wild Wild West
Re: New 401K Question
« Reply #4 on: April 14, 2017, 11:34:05 AM »
I had a job once with a 401k through American Funds, all of which had giant front load fees.  Those fees were waived for $ in the 401k plan, however.  So you might want to ask your plan administrator about those fees, before concluding that you definitely will have to pay them.

Heroes821

  • Pencil Stache
  • ****
  • Posts: 566
Re: New 401K Question
« Reply #5 on: April 14, 2017, 11:37:36 AM »
Maybe you should have a meeting with the people doing this at your job and bring them research and intelligent questions on how this selection is bad and they can do better.

MDM

  • Walrus Stache
  • *******
  • Posts: 9413
Re: New 401K Question
« Reply #6 on: April 14, 2017, 11:51:52 AM »
I had a job once with a 401k through American Funds, all of which had giant front load fees.  Those fees were waived for $ in the 401k plan, however.  So you might want to ask your plan administrator about those fees, before concluding that you definitely will have to pay them.
+1

As CS indicates, you may or may not have these loads within the 401k.

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3038
  • Age: 37
  • Location: Texas
    • Years in the making, I created a journal!
Re: New 401K Question
« Reply #7 on: April 15, 2017, 06:58:05 PM »
You should politely bring this up.   If you decide to leave, file a complaint under ERISA.  That's outright theft in a retirement plan.

In the interim, I would not use their 401k unless you really need the tax savings now (like 28%+ federal and another 5%+ in state taxes)

Firehazard

  • Stubble
  • **
  • Posts: 118
Re: New 401K Question
« Reply #8 on: April 17, 2017, 06:30:06 PM »
You might have some quiet conversations with coworkers about the outrageousness of the fee structure, in case they aren't recognizing that.  Then you all make noise about it individually and maybe HR will take note and get a better plan in place.