The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: missundecided on August 08, 2016, 03:11:35 PM
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I recently changed employers, and I have until September to make a decision about my old 401k (after that date, it's locked to my employer's offerings). My knee jerk reaction was to move everything to Vanguard, but I wanted to compare my existing funds with Vanguard's options.
Problem is, I can't figure out what would be the equivalent to the Principal Large Cap S&P 500 Index Separate Account I5 (https://www.principal.com/allweb/docs/RIS/investments/factsheet/NX070.pdf) over at Vanguard. Is it the VLCAX?
The reason I ask is because the Principal fund has an expense ratio of 0.06% while VLCAX is 0.08%. Which makes me wonder...should I stay put?
The other fund in my old 401k is actually a Vanguard fund, and as far as I can tell, the expense ratio is the same. When I spoke with Principal, they said there are no fees for me to keep my money there.
Am I thinking about this in the wrong way?
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This is the one I have and recommend in my Vanguard empolyer 401k:
Vanguard Institutional Index Fund Institutional Plus Shares (VIIIX)
Fund facts
Asset class Domestic Stock Funds
Category Large Blend
Gross expense ratio
as of 04/27/2016 0.02%
Net expense ratio
as of 04/27/2016 0.02%
Fund number 0854
Fund advisor
Vanguard Equity Index Group
Product summary
Seeks to track the performance of the Standard & Poor’s 500 Index, which measures the investment return of large-capitalization stocks.
Follows a passively managed, full-replication approach.
Provides a convenient way to match the performance of a substantial portion of the nation’s largest stocks.
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The Vanguard S&P 500 fund is VFIAX, which has an expense ratio of 0.05%. I have no idea what the difference between that and VLCAX is, but you can compare them yourself (go to the fund's page (https://personal.vanguard.com/us/funds/snapshot?FundId=0540&FundIntExt=INT), click the "compare" button and type in the other fund's symbol). Other than the expense ratio, the other main difference I see is that VFIAX holdes 507 stocks while VLCAX holdes 612.
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If you "rollover" your old 401(k) to Vanguard, it becomes a Traditional IRA. If you've declared bankruptcy before, or think you might in the near future, you might keep the money in a 401(k) for the added bankruptcy protection. For everyone else, I'd say greater control over your account makes the rollover worth it.
Once you roll over to a Traditional IRA, you have the option to convert some of it to a Roth IRA (paying taxes now at your current tax rate). You also get to pick the funds, rather than being locked into the fund choices. Note 401(k) plans do change funds over time, so you can be forced into new funds when the 401(k) changes.
Don't get overly caught up on 0.02% differences in expense ratio. With $10,000 invested, that's $2 per year. Your percentage bonds and percentage international will probably matter a lot more than $2/year in fees.