Feeling Stuck

[chris316]

Hi, I'm a bit new but have a dilemma. I have a simple IRA with my employer and they match 3% however I'm in the John Hancock lifestyle aggressive portfolio JCLAX where the operating expense is 2.11%(ouch). I have been in it for 3 years and could move it to something else.

I want to get out of that but still benefit from the employee match.

I have a roth ira with vanguard vtsmx

and a very small amount of cash in a traditional ira account with vanguard

My company may move to a 401k by January of 2017

What are some options  or things I can do?

Thanks

[Frankies Girl]

You should double check that the fund is the best deal out of the offered funds (basically the shiniest turd in the pile). Check to make sure there is no other offering that is a wide based stock with a lower expense ratio.

If there is, switch to that one. If not, stick with what you've got and make a polite plea to your company to really, really consider switching to a better retirement company (like Vanguard!). Explain how their 3% match isn't a really great deal since most of that match is eaten up by the fund operating expenses, and there are waaaaay better choices out there that would benefit everyone in your company and make them look even more attractive and smart for offering them (like Vanguard! Mention this as often as you can).

But basically, the advice is to find the best crappy fund available, hold your nose and keep investing in it according to the investing order. You're still getting the benefit of pre-taxed investing and even with it being bad, it's still going to be better than not investing at all. You get the 2-fold advantage: one, that you get to pull money out of your paycheck and reduce your taxable income right now; and two, that you're investing that money for growth for the future.

But do ask about better investing opportunities. Sometimes all it takes is a polite but persistent ask to get things on someone's radar and take action. (and did you mean January of 2018? 2017 is already done and gone)

[chris316]

You should double check that the fund is the best deal out of the offered funds (basically the shiniest turd in the pile). Check to make sure there is no other offering that is a wide based stock with a lower expense ratio.

If there is, switch to that one. If not, stick with what you've got and make a polite plea to your company to really, really consider switching to a better retirement company (like Vanguard!). Explain how their 3% match isn't a really great deal since most of that match is eaten up by the fund operating expenses, and there are waaaaay better choices out there that would benefit everyone in your company and make them look even more attractive and smart for offering them (like Vanguard! Mention this as often as you can).

But basically, the advice is to find the best crappy fund available, hold your nose and keep investing in it according to the investing order. You're still getting the benefit of pre-taxed investing and even with it being bad, it's still going to be better than not investing at all. You get the 2-fold advantage: one, that you get to pull money out of your paycheck and reduce your taxable income right now; and two, that you're investing that money for growth for the future.

But do ask about better investing opportunities. Sometimes all it takes is a polite but persistent ask to get things on someone's radar and take action. (and did you mean January of 2018? 2017 is already done and gone)

Yes, sorry, I meant January of 2018.

Would it be worth it to pull what I have from my simple and put it into my vanguard traditional?  And then only contribute the minimum 3% match to the simple? Or will this mess with the compounding of the simple?
How many times can I roll my simple into something else?

[lthenderson]

Would it be worth it to pull what I have from my simple and put it into my vanguard traditional?  And then only contribute the minimum 3% match to the simple? Or will this mess with the compounding of the simple?
How many times can I roll my simple into something else?

It is really employer plan specific. Some will let you roll them over while employed and others won't. Some drawbacks to rolling them over while employed is that some plans will put a temporary ban on new contributions after a roll over. Also some plans will let you take a loan from your 401k but if rolled over, you wouldn't be able to take advantage if needed. The best way to figure it out is read the details in your specific plan to see what is allowed and what isn't.

[Ebrat]

What other investment options do you have in the SIMPLE IRA?

[Rockies]

See if your employer plan offers and funds with the word "index" in them. If its a crappy company they should still offer something index wise that is around a 0.7% expense ratio, which is a little bit high, but not deadly like 2.11%. You can live with that lower cost fund until you do some thorough research on your options or until your employer switches plans.

[chris316]

What other investment options do you have in the SIMPLE IRA?

See if your employer plan offers and funds with the word "index" in them. If its a crappy company they should still offer something index wise that is around a 0.7% expense ratio, which is a little bit high, but not deadly like 2.11%.

I don't see any available with "index" and I don't really see any with an expense ratio lower than 1%...  is it really only about the expense ratio? or what else should I look for?

here are my option under "class C" : http://www.jhinvestments.com/Fund/PriceTable.aspx

[MustacheAndaHalf]

You could switch to "John Hancock Fundamental Large Cap Core Fund Class I (JLVIX)" which has a much lower 0.78% expense ratio.  It holds 80% large cap, 14% mid cap and 6% small cap.. a little less than the market, but decent.  Switching from your current 2.11% annual expense ratio would save 1.33%/year.  For example, an account with $30,000 would save $400/year in lower fees.

Hopefully your employer gets wise about expense ratios and picks something better.

[Radagast]

Go with the stock fund with the lowest net expense ratio. Fund expenses are the most strongly correlated parameter with fund return: funds with the lowest quartile of expense ratios outperform funds with the highest quartile of expense ratios something like 100% of the time over ten years, and they even outperform the second quartile over 90% of the time. There is an in depth study on that somewhere I can't remember the link to, so the specifics are vague, but the concept is very clear. Lower expenses result in higher returns. Other than selecting stock/bond, don't even think about anything other than lowest expense until it is under 0.50%.

Use your IRA to invest in whatever that fund misses, for example if you go with "John Hancock Fundamental Large Cap Core Fund Class I (JLVIX)" per above then you could open a Vanguard IRA and invest in international small company stocks, as international and small company are underweighted in your IRA.

That plan does kind of suck. All reputable places allow you to see the entire list of expense ratios at first glance. So let's say it for the record: John Hancock sucks.