Author Topic: Company is finally getting 401k, Garbage options  (Read 8226 times)

kevinb421

  • Stubble
  • **
  • Posts: 110
Company is finally getting 401k, Garbage options
« on: December 04, 2014, 12:21:55 PM »
My company is fixing their 401k plan as of the first of the year. I have made my objections clear but they have fallen on deaf ears.
Here are the options we get at the end of the day..... I have researched all of these and everything is just garbage, pretty much nothing under 1% and nothing that strives to capture the total market. Anyone with more experience with mutual funds that can recommend a decent allocation among this junk?


Specialty1 Ivy Global Natural Resources R
MFS Utilities R2
Oppenheimer Gold & Special Minerals R
Oppenheimer Real Estate R
International/Global2 American Funds Cap World Growth and Income R1
Franklin Mutual Global Discovery R
Oppenheimer Developing Markets R
Thornburg International Value R3
Small-cap3 Franklin Small Cap Value R
Royce Total Return R
Mid-cap4 Eaton Vance Atlanta Capital SMID-Cap R
Lord Abbett Value Opportunities R3
Prudential Jennison Mid-Cap Growth Fund R
Royce Value R
Large-cap Alger Capital Appreciation Institutional R
American Funds Washington Mutual Investors R1
Franklin Growth R
Lord Abbett Fundamental Equity R3
Asset allocation/Balanced* American Funds Capital Income Builder R1
Franklin Conservative Allocation R
Franklin Growth Allocation R
Franklin Income R
Franklin Moderate Allocation R
Ivy Asset Strategy R
Bonds5 Alliance Bernstein High Income R
Franklin Total Return R
PIMCO Total Return R
Templeton Global Bond R
Money market/Stable value6 Fixed Account

Oh and can I add, there is a 1% fee in addition to the fees of each individual fund for the privilege of it being in a 401k with this company.

« Last Edit: December 04, 2014, 12:26:06 PM by kevinb421 »

GGNoob

  • Pencil Stache
  • ****
  • Posts: 725
  • Age: 32
  • Location: Colorado
Re: Company is finally getting 401k, Garbage options
« Reply #1 on: December 04, 2014, 12:45:21 PM »
Unless you are getting a match, you'll want to max out your IRA and HSA (if available) first so you can invest in lower cost funds. You may already be doing that, but I figured I'd point that out just in case.

If you are able to, post the expense ratio for each fund. Otherwise it's kinda hard to know which one you should choose.

solon

  • Handlebar Stache
  • *****
  • Posts: 1615
  • Age: 1819
  • Location: CO
Re: Company is finally getting 401k, Garbage options
« Reply #2 on: December 04, 2014, 12:47:24 PM »
Yeah, this kind of stuff sucks. My company offers a similar plan, with horrible and expensive options. My strategy is to contribute the max match, and transfer it all out at the end of the year. The match more than makes up for the expenses, and once I get it out of there the crazy expenses stop.

kevinb421

  • Stubble
  • **
  • Posts: 110
Re: Company is finally getting 401k, Garbage options
« Reply #3 on: December 04, 2014, 12:57:40 PM »
they are doing a 3-4% match which still makes it worth it. How do you transfer it out at the end of the year? I was under the impression that you are stuck until you end employment.

solon

  • Handlebar Stache
  • *****
  • Posts: 1615
  • Age: 1819
  • Location: CO
Re: Company is finally getting 401k, Garbage options
« Reply #4 on: December 04, 2014, 01:15:35 PM »
I just call Vanguard. They ask me some questions and fill out the paperwork for me. I just have to sign the papers and send them in. I keep the existing plan in place, so I can keep contributing every year.

BarkyardBQ

  • Pencil Stache
  • ****
  • Posts: 667
Re: Company is finally getting 401k, Garbage options
« Reply #5 on: December 04, 2014, 01:19:32 PM »
I just call Vanguard. They ask me some questions and fill out the paperwork for me. I just have to sign the papers and send them in. I keep the existing plan in place, so I can keep contributing every year.

WHAAT?!

Is this possible with any plan, like a 457? What do you transfer it into, Traditional IRA?

wudged

  • 5 O'Clock Shadow
  • *
  • Posts: 70
Re: Company is finally getting 401k, Garbage options
« Reply #6 on: December 04, 2014, 01:26:02 PM »
I just call Vanguard. They ask me some questions and fill out the paperwork for me. I just have to sign the papers and send them in. I keep the existing plan in place, so I can keep contributing every year.

WHAAT?!

Is this possible with any plan, like a 457? What do you transfer it into, Traditional IRA?

I did this earlier this year with a SIMPLE IRA, into a Traditional IRA.  The expense rations for the funds available in my SIMPLE IRA are all 2% and up.  I believe the plan has to allow in-service distributions in order to do this (which I think is required for anyway for SIMPLE IRA plans.)

GGNoob

  • Pencil Stache
  • ****
  • Posts: 725
  • Age: 32
  • Location: Colorado
Re: Company is finally getting 401k, Garbage options
« Reply #7 on: December 04, 2014, 01:34:28 PM »
I just call Vanguard. They ask me some questions and fill out the paperwork for me. I just have to sign the papers and send them in. I keep the existing plan in place, so I can keep contributing every year.

WHAAT?!

Is this possible with any plan, like a 457? What do you transfer it into, Traditional IRA?

Even if its available, you probably wouldn't want to do it with a 457. The 457 allows you to withdraw money from it without penalty anytime once you end employment with that company. If you transferred it to a Traditional IRA, you would then have to wait until 59.5. So a 457 is great for somebody who plans to have an early retirement.

kaizen soze

  • Stubble
  • **
  • Posts: 130
Re: Company is finally getting 401k, Garbage options
« Reply #8 on: December 04, 2014, 01:34:50 PM »
Depending on your desired asset allocations, and the amount of money you have saved (and will continue to save) outside of a tax-advantaged account, you might just pick the lowest-cost fund and invest everything in the 401k in that, making sure to keep your overall portfolio in correct asset balance.  There's no reason to diversify inside your 401k, especially if you are likely to leave your employer sometime in the next 10 years and roll it over into an IRA with Vanguard or somewhere else with better options.

Another Reader

  • Walrus Stache
  • *******
  • Posts: 5079
Re: Company is finally getting 401k, Garbage options
« Reply #9 on: December 04, 2014, 01:37:17 PM »
That's a stinking pile of garbage funds.  With the 1 percent "pay to play" fee, you are really getting the shaft.  I'm not sure it's worth doing this.  If you have a $100,000 balance, it sounds like you are charged $1,000 for the "pay to play" fee and then another $1-$2,000 in fund fees.  That wipes out most of the company match if you are making under $100k.

In your shoes, I would look at maxing out all my other tax deferred options, such as IRA's for me and the spouse.  Then I might throw money at some taxable accounts, depending on my tax liability.  Very few plans let you do "in service rollovers," which is what Solon is doing.  Check into that to see if your company does, as that makes the plan more useful.  If you can do in-service rollovers, check what the stable value fund is paying.  If it's positive after fees, I might just use that to store the money until it could be rolled over.

Not sure how much you like your current job, but if a better offer came along with a much better 401k, I would think about taking it.  And I would not be shy in the exit interview.

BarkyardBQ

  • Pencil Stache
  • ****
  • Posts: 667
Re: Company is finally getting 401k, Garbage options
« Reply #10 on: December 04, 2014, 01:38:20 PM »
I just call Vanguard. They ask me some questions and fill out the paperwork for me. I just have to sign the papers and send them in. I keep the existing plan in place, so I can keep contributing every year.

WHAAT?!

Is this possible with any plan, like a 457? What do you transfer it into, Traditional IRA?

Even if its available, you probably wouldn't want to do it with a 457. The 457 allows you to withdraw money from it without penalty anytime once you end employment with that company. If you transferred it to a Traditional IRA, you would then have to wait until 59.5. So a 457 is great for somebody who plans to have an early retirement.


Yea, I know the 457 is a great option, we have 2. Just weighing the options of fees and time/management.
« Last Edit: December 04, 2014, 01:51:13 PM by zdravé »

skyrefuge

  • Handlebar Stache
  • *****
  • Posts: 1007
  • Location: Suburban Chicago, IL
Re: Company is finally getting 401k, Garbage options
« Reply #11 on: December 04, 2014, 02:57:18 PM »
My strategy is to contribute the max match, and transfer it all out at the end of the year.

As Another Reader notes, this is a fairly rare feature of 401(k) plans. Just want to make that extra clear so you don't keep going around giving people like zdravé heart attacks of excitement followed by more heart attacks of disappointment when they find out their plan doesn't allow it.

canonizer

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Company is finally getting 401k, Garbage options
« Reply #12 on: December 04, 2014, 03:15:54 PM »
Is there a self-directed option and are there costs besides the mandatory 1% fee? This sounds almost criminal to me.

BarkyardBQ

  • Pencil Stache
  • ****
  • Posts: 667
Re: Company is finally getting 401k, Garbage options
« Reply #13 on: December 04, 2014, 03:19:07 PM »
My strategy is to contribute the max match, and transfer it all out at the end of the year.

As Another Reader notes, this is a fairly rare feature of 401(k) plans. Just want to make that extra clear so you don't keep going around giving people like zdravé heart attacks of excitement followed by more heart attacks of disappointment when they find out their plan doesn't allow it.

haha riiight! :)

I'm was just shopping for options cause the wifes 457 plan at Voya charges an additional .19% expense just for using the limited 5 Vanguard funds it offers. All the other funds at .7-1.2%

Dodge

  • Pencil Stache
  • ****
  • Posts: 790
Re: Company is finally getting 401k, Garbage options
« Reply #14 on: December 04, 2014, 04:56:09 PM »

My company is fixing their 401k plan as of the first of the year. I have made my objections clear but they have fallen on deaf ears.
Here are the options we get at the end of the day..... I have researched all of these and everything is just garbage, pretty much nothing under 1% and nothing that strives to capture the total market. Anyone with more experience with mutual funds that can recommend a decent allocation among this junk?


Specialty1 Ivy Global Natural Resources R
MFS Utilities R2
Oppenheimer Gold & Special Minerals R
Oppenheimer Real Estate R
International/Global2 American Funds Cap World Growth and Income R1
Franklin Mutual Global Discovery R
Oppenheimer Developing Markets R
Thornburg International Value R3
Small-cap3 Franklin Small Cap Value R
Royce Total Return R
Mid-cap4 Eaton Vance Atlanta Capital SMID-Cap R
Lord Abbett Value Opportunities R3
Prudential Jennison Mid-Cap Growth Fund R
Royce Value R
Large-cap Alger Capital Appreciation Institutional R
American Funds Washington Mutual Investors R1
Franklin Growth R
Lord Abbett Fundamental Equity R3
Asset allocation/Balanced* American Funds Capital Income Builder R1
Franklin Conservative Allocation R
Franklin Growth Allocation R
Franklin Income R
Franklin Moderate Allocation R
Ivy Asset Strategy R
Bonds5 Alliance Bernstein High Income R
Franklin Total Return R
PIMCO Total Return R
Templeton Global Bond R
Money market/Stable value6 Fixed Account

Oh and can I add, there is a 1% fee in addition to the fees of each individual fund for the privilege of it being in a 401k with this company.

Can you include the expense ratios in your original post? By law I think there needs to be at least one low fee option.

kevinb421

  • Stubble
  • **
  • Posts: 110
Re: Company is finally getting 401k, Garbage options
« Reply #15 on: December 05, 2014, 07:48:16 AM »

My company is fixing their 401k plan as of the first of the year. I have made my objections clear but they have fallen on deaf ears.
Here are the options we get at the end of the day..... I have researched all of these and everything is just garbage, pretty much nothing under 1% and nothing that strives to capture the total market. Anyone with more experience with mutual funds that can recommend a decent allocation among this junk?


Specialty1 Ivy Global Natural Resources R
MFS Utilities R2
Oppenheimer Gold & Special Minerals R
Oppenheimer Real Estate R
International/Global2 American Funds Cap World Growth and Income R1
Franklin Mutual Global Discovery R
Oppenheimer Developing Markets R
Thornburg International Value R3
Small-cap3 Franklin Small Cap Value R
Royce Total Return R
Mid-cap4 Eaton Vance Atlanta Capital SMID-Cap R
Lord Abbett Value Opportunities R3
Prudential Jennison Mid-Cap Growth Fund R
Royce Value R
Large-cap Alger Capital Appreciation Institutional R
American Funds Washington Mutual Investors R1
Franklin Growth R
Lord Abbett Fundamental Equity R3
Asset allocation/Balanced* American Funds Capital Income Builder R1
Franklin Conservative Allocation R
Franklin Growth Allocation R
Franklin Income R
Franklin Moderate Allocation R
Ivy Asset Strategy R
Bonds5 Alliance Bernstein High Income R
Franklin Total Return R
PIMCO Total Return R
Templeton Global Bond R
Money market/Stable value6 Fixed Account

Oh and can I add, there is a 1% fee in addition to the fees of each individual fund for the privilege of it being in a 401k with this company.

Can you include the expense ratios in your original post? By law I think there needs to be at least one low fee option.

I could throw the expense ratios in, but it wont really do much. The total fees average around 2.5%-3%. the cheapest is just over 2% and thats for one of the stable bond funds.
As someone said earlier it is almost criminal and at my 52k salary my match barely covers the fees AND then I'm going to get hit every year with these fees.

skyrefuge

  • Handlebar Stache
  • *****
  • Posts: 1007
  • Location: Suburban Chicago, IL
Re: Company is finally getting 401k, Garbage options
« Reply #16 on: December 05, 2014, 10:55:29 AM »
The good news is, you have a couple of funds managed by Lord Abbett. With a name like that, I have no doubt that guy can manage the hell out of a mutual fund. I would put my full faith and trust behind him and top hat and his monocle; after all, you don't get a top hat by doing a shitty job of managing money, amirite?

And if for some bizarre reason you don't trust him, you've also got:

Royce (surely they'll have you driving a Rolls of your own in no time!)
Ivy (like the League, where so many smart people come from!)
Franklin (what a great patriot!)
Prudential (I hear they're like a rock!)
Oppenheimer (he'll turn your money into a nuclear fireball!)

So really, with names like that, you can't go wrong. Oh, ok, you probably want to avoid that Oppenheimer guy...

Dodge

  • Pencil Stache
  • ****
  • Posts: 790
Re: Company is finally getting 401k, Garbage options
« Reply #17 on: December 05, 2014, 11:35:22 AM »

My company is fixing their 401k plan as of the first of the year. I have made my objections clear but they have fallen on deaf ears.
Here are the options we get at the end of the day..... I have researched all of these and everything is just garbage, pretty much nothing under 1% and nothing that strives to capture the total market. Anyone with more experience with mutual funds that can recommend a decent allocation among this junk?


Specialty1 Ivy Global Natural Resources R
MFS Utilities R2
Oppenheimer Gold & Special Minerals R
Oppenheimer Real Estate R
International/Global2 American Funds Cap World Growth and Income R1
Franklin Mutual Global Discovery R
Oppenheimer Developing Markets R
Thornburg International Value R3
Small-cap3 Franklin Small Cap Value R
Royce Total Return R
Mid-cap4 Eaton Vance Atlanta Capital SMID-Cap R
Lord Abbett Value Opportunities R3
Prudential Jennison Mid-Cap Growth Fund R
Royce Value R
Large-cap Alger Capital Appreciation Institutional R
American Funds Washington Mutual Investors R1
Franklin Growth R
Lord Abbett Fundamental Equity R3
Asset allocation/Balanced* American Funds Capital Income Builder R1
Franklin Conservative Allocation R
Franklin Growth Allocation R
Franklin Income R
Franklin Moderate Allocation R
Ivy Asset Strategy R
Bonds5 Alliance Bernstein High Income R
Franklin Total Return R
PIMCO Total Return R
Templeton Global Bond R
Money market/Stable value6 Fixed Account

Oh and can I add, there is a 1% fee in addition to the fees of each individual fund for the privilege of it being in a 401k with this company.

Can you include the expense ratios in your original post? By law I think there needs to be at least one low fee option.

I could throw the expense ratios in, but it wont really do much. The total fees average around 2.5%-3%. the cheapest is just over 2% and thats for one of the stable bond funds.
As someone said earlier it is almost criminal and at my 52k salary my match barely covers the fees AND then I'm going to get hit every year with these fees.

Franklin Total Return R - http://quotes.morningstar.com/fund/FTRRX/f?t=FTRRX - No load and 1.13% ER
PIMCO Total Return R - http://quotes.morningstar.com/fund/ptrrx/f?t=PTRRX - No load and 1.10% ER
Templeton Global Bond R - http://quotes.morningstar.com/fund/f?region=USA&t=FGBRX - No load and 1.14% ER

The first three I looked at, all had under 2% ER, and I'm not sure of the specifics on "Money market/Stable value6 Fixed Account".  If you want a good recommendation, we're going to need the ERs.

kevinb421

  • Stubble
  • **
  • Posts: 110
Re: Company is finally getting 401k, Garbage options
« Reply #18 on: December 05, 2014, 12:17:22 PM »

My company is fixing their 401k plan as of the first of the year. I have made my objections clear but they have fallen on deaf ears.
Here are the options we get at the end of the day..... I have researched all of these and everything is just garbage, pretty much nothing under 1% and nothing that strives to capture the total market. Anyone with more experience with mutual funds that can recommend a decent allocation among this junk?


Specialty1 Ivy Global Natural Resources R
MFS Utilities R2
Oppenheimer Gold & Special Minerals R
Oppenheimer Real Estate R
International/Global2 American Funds Cap World Growth and Income R1
Franklin Mutual Global Discovery R
Oppenheimer Developing Markets R
Thornburg International Value R3
Small-cap3 Franklin Small Cap Value R
Royce Total Return R
Mid-cap4 Eaton Vance Atlanta Capital SMID-Cap R
Lord Abbett Value Opportunities R3
Prudential Jennison Mid-Cap Growth Fund R
Royce Value R
Large-cap Alger Capital Appreciation Institutional R
American Funds Washington Mutual Investors R1
Franklin Growth R
Lord Abbett Fundamental Equity R3
Asset allocation/Balanced* American Funds Capital Income Builder R1
Franklin Conservative Allocation R
Franklin Growth Allocation R
Franklin Income R
Franklin Moderate Allocation R
Ivy Asset Strategy R
Bonds5 Alliance Bernstein High Income R
Franklin Total Return R
PIMCO Total Return R
Templeton Global Bond R
Money market/Stable value6 Fixed Account

Oh and can I add, there is a 1% fee in addition to the fees of each individual fund for the privilege of it being in a 401k with this company.

Can you include the expense ratios in your original post? By law I think there needs to be at least one low fee option.

I could throw the expense ratios in, but it wont really do much. The total fees average around 2.5%-3%. the cheapest is just over 2% and thats for one of the stable bond funds.
As someone said earlier it is almost criminal and at my 52k salary my match barely covers the fees AND then I'm going to get hit every year with these fees.

Franklin Total Return R - http://quotes.morningstar.com/fund/FTRRX/f?t=FTRRX - No load and 1.13% ER
PIMCO Total Return R - http://quotes.morningstar.com/fund/ptrrx/f?t=PTRRX - No load and 1.10% ER
Templeton Global Bond R - http://quotes.morningstar.com/fund/f?region=USA&t=FGBRX - No load and 1.14% ER

The first three I looked at, all had under 2% ER, and I'm not sure of the specifics on "Money market/Stable value6 Fixed Account".  If you want a good recommendation, we're going to need the ERs.
The ER's are the funds + 1% so that 1.14% fund magically becomes 2.14% under this 401k

Dodge

  • Pencil Stache
  • ****
  • Posts: 790
Re: Company is finally getting 401k, Garbage options
« Reply #19 on: December 05, 2014, 12:28:04 PM »

My company is fixing their 401k plan as of the first of the year. I have made my objections clear but they have fallen on deaf ears.
Here are the options we get at the end of the day..... I have researched all of these and everything is just garbage, pretty much nothing under 1% and nothing that strives to capture the total market. Anyone with more experience with mutual funds that can recommend a decent allocation among this junk?


Specialty1 Ivy Global Natural Resources R
MFS Utilities R2
Oppenheimer Gold & Special Minerals R
Oppenheimer Real Estate R
International/Global2 American Funds Cap World Growth and Income R1
Franklin Mutual Global Discovery R
Oppenheimer Developing Markets R
Thornburg International Value R3
Small-cap3 Franklin Small Cap Value R
Royce Total Return R
Mid-cap4 Eaton Vance Atlanta Capital SMID-Cap R
Lord Abbett Value Opportunities R3
Prudential Jennison Mid-Cap Growth Fund R
Royce Value R
Large-cap Alger Capital Appreciation Institutional R
American Funds Washington Mutual Investors R1
Franklin Growth R
Lord Abbett Fundamental Equity R3
Asset allocation/Balanced* American Funds Capital Income Builder R1
Franklin Conservative Allocation R
Franklin Growth Allocation R
Franklin Income R
Franklin Moderate Allocation R
Ivy Asset Strategy R
Bonds5 Alliance Bernstein High Income R
Franklin Total Return R
PIMCO Total Return R
Templeton Global Bond R
Money market/Stable value6 Fixed Account

Oh and can I add, there is a 1% fee in addition to the fees of each individual fund for the privilege of it being in a 401k with this company.

Can you include the expense ratios in your original post? By law I think there needs to be at least one low fee option.

I could throw the expense ratios in, but it wont really do much. The total fees average around 2.5%-3%. the cheapest is just over 2% and thats for one of the stable bond funds.
As someone said earlier it is almost criminal and at my 52k salary my match barely covers the fees AND then I'm going to get hit every year with these fees.

Franklin Total Return R - http://quotes.morningstar.com/fund/FTRRX/f?t=FTRRX - No load and 1.13% ER
PIMCO Total Return R - http://quotes.morningstar.com/fund/ptrrx/f?t=PTRRX - No load and 1.10% ER
Templeton Global Bond R - http://quotes.morningstar.com/fund/f?region=USA&t=FGBRX - No load and 1.14% ER

The first three I looked at, all had under 2% ER, and I'm not sure of the specifics on "Money market/Stable value6 Fixed Account".  If you want a good recommendation, we're going to need the ERs.
The ER's are the funds + 1% so that 1.14% fund magically becomes 2.14% under this 401k

...oh

Well then, I see your predicament.  I'd look-up the laws on that, as I'm almost sure I read something saying there must be at least one low-fee option.  In any case, I would still max out the 401k, with their most index-like fund, which is probably one of the Total Return, or Global Bond funds. Think of it this way:

1.  You're getting something like a 30% bump from not having to pay taxes on the money.  Even with the 2% fee, it will take many years to get to break-even.

2.  If you leave the company before it gets to break-even, you transfer it to an IRA and you're ahead.  If they wise-up and offer a lower-fee option, you can move all your money to that fund, and you'll be ahead.  If you don't max out the $18,000 (2015) 401k max, you will never get that back, your tax-sheltered pot will permanently be lowered, forever.  It's important to maximize your tax-sheltered pot for long-term growth, even if the options temporarily suck.

skyrefuge

  • Handlebar Stache
  • *****
  • Posts: 1007
  • Location: Suburban Chicago, IL
Re: Company is finally getting 401k, Garbage options
« Reply #20 on: December 05, 2014, 01:05:12 PM »
I'd look-up the laws on that, as I'm almost sure I read something saying there must be at least one low-fee option.

I've never heard of any such thing, and this talks all about fees and their disclosure in retirement plans, but makes no mention of a "low-fee option" requirement. Since companies aren't required to offer 401(k)s in the first place, it would seem strange that they'd be forced to have low-fee options if they choose to have a 401(k).

 
In any case, I would still max out the 401k, with their most index-like fund, which is probably one of the Total Return, or Global Bond funds.

Those are all bond funds. I guess if the OP's chosen asset allocation tells him he needs all bonds in his 401(k), sure, maybe, but otherwise, that's a strange recommendation. From the Large Cap category, Alger Capital Appreciation Institutional has a comparable 1.19%, so if you're going to get a big chunk of your money eaten by expenses no matter what, it's probably better to put it in something that at least has a chance of overcoming those expenses.

danny9m

  • 5 O'Clock Shadow
  • *
  • Posts: 49
Re: Company is finally getting 401k, Garbage options
« Reply #21 on: December 07, 2014, 08:42:04 PM »
I'd open a Roth instead.  At the expense ratio you would be paying effectively all your dividends would go to cover your expense ratio.  Plus according to tony Robbins new book the real expense ratio of these duns are between 2 to 3 percent, add the 1 percent additional and you have no chance to retire early.


Sent from my iPad using Tapatalk

Thegoblinchief

  • Guest
Re: Company is finally getting 401k, Garbage options
« Reply #22 on: December 08, 2014, 12:08:47 PM »
At a salary of 52k I don't see how a mere 4% match makes doing any level of contribution worth it with those options. Your tax penalty just isn't high enough, especially once you fill up a tIRA.

skyrefuge

  • Handlebar Stache
  • *****
  • Posts: 1007
  • Location: Suburban Chicago, IL
Re: Company is finally getting 401k, Garbage options
« Reply #23 on: December 08, 2014, 04:15:47 PM »
At a salary of 52k I don't see how a mere 4% match makes doing any level of contribution worth it with those options. Your tax penalty just isn't high enough, especially once you fill up a tIRA.

I'm as much of a low-cost index-fund supporter as anyone, but recall that the research shows that most actively-manged funds underperform after expenses are taken into account. I don't think there is strong evidence showing that they underperform even before expenses. So it's not like you can just assume "those funds are just going to underperform by 1.5%". They might actually beat index funds before expenses, and then be drawn down fairly close to index fund performance by their expenses. The additional 1% expense on top of that is another story, but even with a $52k salary, the matching funds make it pretty hard to lose, at least assuming the OP's money isn't in this plan for 3 decades (and whose is these days?)

trugrit03

  • 5 O'Clock Shadow
  • *
  • Posts: 25
Re: Company is finally getting 401k, Garbage options
« Reply #24 on: December 08, 2014, 04:48:59 PM »
At a salary of 52k I don't see how a mere 4% match makes doing any level of contribution worth it with those options. Your tax penalty just isn't high enough, especially once you fill up a tIRA.

I think a lot of people are misunderstanding this (I just quoted thegoblinchief because his post was the shortest). Normally when someone says their company has a 4% match, that means they match you dollar for dollar on the 4% you contribute. So for example, if someone is making $52K, 4% of their salary is $2,080. The employee puts in $2,080 and the employer MATCHES the $2,080, for a total of $4,160 in a year. So you see, it's like getting an instant 100% return. Make sense?

Kevin, a few key questions:
1. Can you confirm if it is actually a dollar for dollar match on your 4% contributions? The way you stated it makes me think maybe the employer hasn't clearly stated what the match will be.
2. What kind of allocation do you want between Money Market/Bonds/Stocks/International? This is the most important factor for you, not the expense ratio.