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Learning, Sharing, and Teaching => Investor Alley => Topic started by: RH on December 01, 2014, 11:06:26 AM

Title: Company Switching to Vanguard for 401K
Post by: RH on December 01, 2014, 11:06:26 AM
Hi, my company is switching to Vanguard for our 401K (horray!). Now we have to decide the portfolio of funds to offer employees. Here's their generic list. Should we add/remove some to widdle it down from 30 to 10 funds?

Ticker   Fund Name                                                  Morningstar Category   Expense Ratio
VTENX   Vanguard Target Retirement 2010 Investor   Target Date 2000-2010   0.16%
VTXVX   Vanguard Target Retirement 2015 Investor   Target Date 2011-2015   0.16%
VTWNX   Vanguard Target Retirement 2020 Investor   Target Date 2016-2020   0.16%
VTTVX   Vanguard Target Retirement 2025 Investor   Target Date 2021-2025   0.17%
VTHRX   Vanguard Target Retirement 2030 Investor   Target Date 2026-2030   0.17%
VTTHX   Vanguard Target Retirement 2035 Investor   Target Date 2031-2035   0.18%
VFORX   Vanguard Target Retirement 2040 Investor   Target Date 2036-2040   0.18%
VTIVX   Vanguard Target Retirement 2045 Investor   Target Date 2041-2045   0.18%
VFIFX   Vanguard Target Retirement 2050 Investor   Target Date 2046-2050   0.18%
VFFVX   Vanguard Target Retirement 2055 Investor   Target Date 2051+               0.18%
VTTSX   Vanguard Target Retirement 2060 Investor   Target Date 2051+        0.18%
VTINX   Vanguard Target Retirement Income Investor   Retirement Income       0.16%
VBINX   Vanguard Balanced Index  Inv   Moderate Allocation                                  0.24%
VMMXX   Vanguard Prime Money Market Investor   Money Market                                0.16%
VBISX   Vanguard Short-Term Bond Index  Inv   Short-Term Bond                                0.20%
VBMFX   Vanguard Total Bond Market Index  Inv   Intermediate-Term Bond                  0.20%
VTIBX   Vanguard Total Intl Bd Idx Investor   World Bond                                0.23%
VTSMX   Vanguard Total Stock Market Index  Inv   Large Blend                                0.17%
VFINX   Vanguard 500 Index Inv   Large Blend                                               0.17%
VIVAX   Vanguard Value Index  Inv   Large Value                                               0.24%
VIGRX   Vanguard Growth Index  Inv   Large Growth                                               0.24%
VIMSX   Vanguard Mid Cap Index  Inv   Mid-Cap Blend                                               0.24%
VMGIX   Vanguard Mid-Cap Growth Index  Investor   Mid-Cap Growth                  0.24%
VMVIX   Vanguard Mid-Cap Value Index  Investor   Mid-Cap Value                       0.24%
NAESX   Vanguard Small Cap Index  Inv   Small Blend                                0.24%
VISGX   Vanguard Small Cap Growth Index Investor   Small Growth                       0.24%
VISVX   Vanguard Small Cap Value Index Investor   Small Value                  0.24%
VGTSX   Vanguard Total Intl Stock Index Inv   Foreign Large Blend                              0.22%
VEIEX   Vanguard Emerging Mkts Stock Index  Inv   Diversified Emerging Mkts   0.33%
VGSIX   Vanguard REIT Index  Inv   Real Estate                                               0.24%
Title: Re: Company Switching to Vanguard for 401K
Post by: seattlecyclone on December 01, 2014, 12:29:10 PM
I think more choices are generally better. Is Vanguard offering to give your company Admiral or Institutional pricing on funds if your employees collectively meet the minimums for those lower-cost share classes? If so, that might be a reason to limit the number of available funds. You'll get to those minimums more quickly if the money is spread across fewer funds. Otherwise I can't think of a great reason not to offer all of the funds.
Title: Re: Company Switching to Vanguard for 401K
Post by: johnny847 on December 01, 2014, 01:33:54 PM
I actually disagree - less choices (that fulfill a 3 or 4 fund portfolio) would actually be better in the sense that too many options oftentimes overwhelms or confuses people.

But I think seattlecyclone's point of fewer funds for Admiral or Institutional pricing is more important. How big is your company RH?
Title: Re: Company Switching to Vanguard for 401K
Post by: seattlecyclone on December 01, 2014, 02:32:16 PM
I'll agree with you that more choices can be confusing to people who don't know anything about investing. That's why a good default is important. Steer people into a target date fund based on their age by default, and make sure they know that this fund should do pretty well for them.

For people who aren't total investing newbies, more choices are nice to have. A three-fund portfolio is great for lots of people. Others might want to put a portion of their stash into REITs or emerging markets or place a higher emphasis on small-cap stocks than the total market fund will provide. Having options for more advanced investors is something I certainly appreciate and I wish my own employer's 401(k) had a slightly larger variety available.
Title: Re: Company Switching to Vanguard for 401K
Post by: RH on December 01, 2014, 03:56:13 PM
We only have 5 employees and Vanguard will give us admiral pricing with no $ minimums. Default of investment will be target fund if employee doesn't specify what they want to invest in. Target fund probably assumes employee wants to retire at age 65....ha!
Title: Re: Company Switching to Vanguard for 401K
Post by: Radagast on December 01, 2014, 09:22:34 PM
Looks great to me, though I doubt many would mind if you trimmed out the three "growth" options. Personally I would also like a long term bond fund, but with only 5 employees it is quite possible that wouldn't be missed either.
Title: Re: Company Switching to Vanguard for 401K
Post by: pdxvandal on December 01, 2014, 10:11:03 PM
RH, can you tell me what the process was like to set up your company with a Vanguard 401k program? I ask as my company has only 6 people. Curious about the costs for them to administrate this for a tiny organization.

Thanks for your input!
Title: Re: Company Switching to Vanguard for 401K
Post by: Druid on December 01, 2014, 10:33:07 PM
It looks like the expense ratio's are a little high. Does Vanguard have higher expense ratios for smaller companies? My Vanguard 401k has expense ratios as low as 0.02, 0.05, etc. Target funds are 0.07...
Title: Re: Company Switching to Vanguard for 401K
Post by: seattlecyclone on December 02, 2014, 12:56:01 AM
Yes, they do have higher expense ratios for smaller companies. If you have the 0.02% expense ratios you probably work for a huge company. The Institutional Plus class of the Vanguard 500 Index fund (VIIIX ( has a 0.02% expense ratio and requires a minimum investment of $200 million in that fund. A six-person company has no chance of meeting this minimum. The next level down (Institutional) has a 0.04% expense ratio and a minimum investment of $5 million. A six-person company can only meet this if all the employees have been maxing out their retirement accounts for the past 25 years and are all heavily invested in the same fund. The OP said their company was offered the Admiral share class for all of their funds, which is slightly higher than the Institutional class but often much lower than the Investor class that is in the list above.