I've been reviewing my options for allocation in my 401k, and have run into some inconsistencies with regard to reporting that I wanted to ask about here. I set the fund up several years ago, and haven't really paid attention to it. I'm set up in a Principal Target date fund that has returned about 9.9% over a ten year time frame. But what I've noticed is that the expense of this fund is 3 dollars per 1000 invested. To say it another way, the investment expense is .30%. This is just how it's laid out, so if it looks like I don't get it, it's possible I don't. Anyhow, because of what I've been learning recently, I was looking to minimize the expense. I found they had an option to change my allocation to a Principal S&P 500 Index "separate account". Now investment expense, as I can read on Principal's website, is 50 cents per 1000 invested, or .05%. The performance over ten years was shown as something like 11 percent. It seems like I'd be better served by the S&P fund, working with the numbers shown, right?
Well to make the long story a little longer, I checked both funds out from outside the Principal website. The S&P index fund shows two fees: a .46 percent expense ratio and a .15 percent management expense. While the target date fund shows only a .30 percent expense ratio, and no management expense. These numbers come from U.S. News website.
So after all that, I'm thoroughly confused about whether or not there is value in moving my allocations to the index "separate account". I don't want to pay MORE expenses than what they already had me set up for. So what's the deal? I'm hoping there are some clues in what I've written that stand out as obvious mistakes in my evaluation of the two funds. As you can see, it's a fairly basic evaluation. Cost, and ten year performance of all the options offered by the plan.
