Author Topic: Employer 401k With Principal - What To Do  (Read 14801 times)

bk1

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Employer 401k With Principal - What To Do
« on: January 23, 2014, 09:52:57 PM »
I have two questions:
1) I have a RothIRA with Vanguard that I max out. My wife is a stay at home mom. Can we fund a Roth under her name? If so, can it be under my Vanguard account?

2) My employer's 401k program is with Principal. They match up to 3% so I know I should be enrolled up to that amount and right now, I'm at 6%. I currently have about $7,000 in a target retirement account with them. Is there something different I should be doing?

bk1

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Re: Employer 401k With Principal - What To Do
« Reply #1 on: January 23, 2014, 11:11:25 PM »
Expenses for the target retirement account I'm in are .94%. Is there an additional place to look for fees?

The 401k program is through Principal so going through them is my only option. I'm not sure if I can buy Vanguard funds through there though. Is that typical?

As for my spouse's Roth, do I need a new account with Vanguard for her Roth? Don't I need to separate her Roth out from mine in some way so that it's obvious that I'm not breaking rules and over-funding my Roth but the additional funds are for her Roth?
« Last Edit: January 24, 2014, 06:47:48 AM by bk1 »

Another Reader

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Re: Employer 401k With Principal - What To Do
« Reply #2 on: January 24, 2014, 08:37:57 AM »
Usually the load is waived in a qualified plan.  The Prudential person would tell folks at the annual 457 meeting where I worked they were getting a great deal on the awful funds in the plan because they did not have to pay the load.  The other manager at my level and I would have to restrain ourselves from (verbally) beating the crap out of him after the meeting.

justchristine

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Re: Employer 401k With Principal - What To Do
« Reply #3 on: January 24, 2014, 01:12:54 PM »
My 401k is with Principal too.  I started out with the target date funds but then I started educating myself on investing.  Sadly I only have access to 2 index funds and only like three funds with expense ratios under 1%.  So I opted to split my stock allocation between the two stock index funds and my bond allocation goes in the lowest expense bond fund.

bk1

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Re: Employer 401k With Principal - What To Do
« Reply #4 on: January 26, 2014, 08:50:46 PM »
@justchristine - Would you mind sharing the names of those 2 Principal index funds you are talking about? Also, what bond fund do you use? I probably just don't have a good eye for this yet but I can find the index funds with expense ratios under 1%.

The target retirement fund I am in now is .94% though.

Another Reader

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Re: Employer 401k With Principal - What To Do
« Reply #5 on: January 26, 2014, 08:56:19 PM »
If the OP lists the available funds, it will be easier to say what we would do with those choices.

justchristine

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Re: Employer 401k With Principal - What To Do
« Reply #6 on: January 27, 2014, 04:39:07 AM »
@bk1. The fund options that I chose are Bond Mortgage Sep Acct, Large Cap S&P 500 index Sep Acct, and Small Cap S&P 600 index Sep Acct.  They have expense ratios of .71, .31 and .31 respectively.

When you log into the principal website for your account, you can see the expense ratios by going to the Investments>Performance on the left side of your screen.  There is a column titled Expenses...that's the expense ratio fort he funds.

bk1

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Re: Employer 401k With Principal - What To Do
« Reply #7 on: January 27, 2014, 08:54:32 PM »
I will post a couple screenshots of the available funds below. Hopefully you guys can read it well enough.

@justchristine, thanks for pointing that out, I missed it somehow.




Another Reader

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Re: Employer 401k With Principal - What To Do
« Reply #8 on: January 27, 2014, 09:20:03 PM »
Yep, your choices stink on ice (credit to Mel Brooks for that description).

I would look at the two equity index funds, the S&P 500 and the S&P 600 (small cap), for the bulk of the money if these were my choices.  The Principal mid cap has higher expenses at 0.81 percent, but the performance has been acceptable.  I would probably put some in that fund.  Your stable value fund is horrible.  My 457 plan pays 3 percent.  If you want bonds, my choice would be the Pimco core bond, but I would probably look for a better choice in another tax deferred/tax free account.  If "Bond and Mortgage" includes mortgage backed securities, that's too much risk for me.

Target retirement funds are often funds of funds and have two levels of expenses.  If this plan charges 0.94 percent for the target fund on top of the ER's of the component funds, well, that's ridiculous.

Sorry you have to tolerate this.  Your HR department should be embarrassed to offer this plan.

mlipps

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Re: Employer 401k With Principal - What To Do
« Reply #9 on: January 27, 2014, 09:48:34 PM »
Yep, your choices stink on ice (credit to Mel Brooks for that description).

I would look at the two equity index funds, the S&P 500 and the S&P 600 (small cap), for the bulk of the money if these were my choices.  The Principal mid cap has higher expenses at 0.81 percent, but the performance has been acceptable.  I would probably put some in that fund.  Your stable value fund is horrible.  My 457 plan pays 3 percent.  If you want bonds, my choice would be the Pimco core bond, but I would probably look for a better choice in another tax deferred/tax free account.  If "Bond and Mortgage" includes mortgage backed securities, that's too much risk for me.

Target retirement funds are often funds of funds and have two levels of expenses.  If this plan charges 0.94 percent for the target fund on top of the ER's of the component funds, well, that's ridiculous.

Sorry you have to tolerate this.  Your HR department should be embarrassed to offer this plan.

It's not THAT bad. Depending on the balance of your Roth vs. your 401k, you could just hold the S&P 500 fund here, then hold extended market, international & bonds at Vanguard. You just have to make your AA across all accounts, you don't need each of them to hold everything.

On the other hand, did anyone else notice that Target 2060 fund's 3.09% expense ratio? I think that's the highest I've ever seen in a 401k & I'm an avid Boglehead case study reader, so I've seen a lot of them! Good thing you're retiring early! ;)

bk1

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Re: Employer 401k With Principal - What To Do
« Reply #10 on: February 01, 2014, 07:13:04 PM »
Thanks for the input guys. I am just going to put 100% of contributions to the S&P 500 index as it's about the only fund with a decent expense ration. Like you said, I'll just have to make sure I balance the other investments properly.

Mayan

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Re: Employer 401k With Principal - What To Do
« Reply #11 on: February 05, 2014, 10:25:21 PM »
Fwiw, my company is with principal and has identical options.  I invest in the large, mid and small cap index funds (all with 0.31% ER) index funds in a ratio that roughly approximates Vanguard's total stock market index.  I hold international and bond funds in a separate Roth IRA.  For my company, the ER of the 3 index finds is dropping dramatically this year - to something like 0.06%, so it may be worth checking to see if that's happening for you as well. 

bk1

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Re: Employer 401k With Principal - What To Do
« Reply #12 on: February 07, 2014, 09:10:51 PM »
Mayan - How do you know the ER is dropping? Looking at Principal's web portal, it still shows the .31 ER.