Author Topic: Need help with 401k options  (Read 2448 times)

smacpa

  • 5 O'Clock Shadow
  • *
  • Posts: 30
Need help with 401k options
« on: January 16, 2017, 09:06:35 PM »
I'm new to MMM and the FIRE concept, I was looking over my 401k options and I am a bit concerned by the high expense ratios.

What options do I have?

I am already fully funding a Roth IRA for my wife and I.  The 401k should provide another 15,696 in tax advantaged investments.
See my mutual fund options attached thru John Hancock, the lowest ratio is .73

Taran Wanderer

  • Pencil Stache
  • ****
  • Posts: 530
Re: Need help with 401k options
« Reply #1 on: January 16, 2017, 10:03:58 PM »
Page 7 in the middle, John Hancock 500 Index Fund, expense ratio 0.68.

If you only want to think about one fund, that's the one.

lost_in_the_endless_aisle

  • Pencil Stache
  • ****
  • Posts: 894
Re: Need help with 401k options
« Reply #2 on: January 16, 2017, 10:41:25 PM »
Those expenses are terrible--is that normal? You have about 10x more options than I do but I can get VINIX with my employer for 0.04%

smacpa

  • 5 O'Clock Shadow
  • *
  • Posts: 30
Re: Need help with 401k options
« Reply #3 on: January 17, 2017, 03:47:59 AM »
Yes they are terrible, am i allowed to roll my portion of contributions into my IRA?

I'm going to bring up getting more options with HR tomorrow but I have low expectations that will work anytime soon.  In the meantime I'm dumping 1,308 per month in this thing.  I just picked the 8 or so funds with the highest 10 YR return, and spread them among LC, MC, SC, INT.  But regularly those were at 1.30.

lost_in_the_endless_aisle

  • Pencil Stache
  • ****
  • Posts: 894
Re: Need help with 401k options
« Reply #4 on: January 19, 2017, 12:14:19 AM »
Before plowing into the higher cost funds that happened to perform better, you should read what this expert stock picker has to say (yowl?):

http://www.forbes.com/sites/frederickallen/2013/01/15/cat-beats-professionals-at-stock-picking

The best predictor for returns for a given asset class is expense ratio, not past performance.

If you want to predict FIFA World Cup matches, on the other tentacle, talk to Paul the Octopus.

NoStacheOhio

  • Handlebar Stache
  • *****
  • Posts: 2143
  • Location: Cleveland
Re: Need help with 401k options
« Reply #5 on: January 19, 2017, 06:20:04 AM »
Read this, then come back with your questions

http://jlcollinsnh.com/stock-series/

jinga nation

  • Handlebar Stache
  • *****
  • Posts: 1107
  • Location: 'Murica's Johnson
  • Left, Right, Peddlin' Shite
Re: Need help with 401k options
« Reply #6 on: January 19, 2017, 06:25:55 AM »
If you want to predict FIFA World Cup matches, on the other tentacle, talk to Paul the Octopus.

Come on mate, where have you been hiding? Keep up on yer footie! Paul's been a goner for a long time.
https://en.wikipedia.org/wiki/Paul_the_Octopus

jinga nation

  • Handlebar Stache
  • *****
  • Posts: 1107
  • Location: 'Murica's Johnson
  • Left, Right, Peddlin' Shite
Re: Need help with 401k options
« Reply #7 on: January 19, 2017, 06:34:06 AM »
The best predictor for returns for a given asset class is expense ratio, not past performance.
+1. Thank you for emphasizing a much overlooked factor.

Here's one good article: http://www.morningstar.co.uk/uk/news/149421/how-fund-fees-are-the-best-predictor-of-returns.aspx

Here's some pr0n for those who have a numbers fetish: http://us.spindices.com/documents/spiva/spiva-us-year-end-2014.pdf

And some nice simple visuals from Vanguard: https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-cost

fatcow240

  • Stubble
  • **
  • Posts: 170
  • Age: 34
  • Location: Dallas
Re: Need help with 401k options
« Reply #8 on: January 19, 2017, 06:37:49 AM »
Page 7 in the middle, John Hancock 500 Index Fund, expense ratio 0.68.

If you only want to think about one fund, that's the one.

They are really tacking on expenses.  The Vanguard Mid-Cap Growth ETF is 0.79% and directly from Vanguard (VOT) is 0.08%.

Do they allow you to set up a brokerage link?  Either way I would still invest in the 401k.

MoonLiteNite

  • Bristles
  • ***
  • Posts: 413
Re: Need help with 401k options
« Reply #9 on: January 19, 2017, 06:48:18 AM »
Yeah I had them for my first job that offered a 401k.
Huge fees, but the matching % from your employer should cover it, and it is growing tax free.

So may not be the best options, but i would still do them!
As someone posted, you do have an S&P500 tracker in there, go with that.

wudged

  • 5 O'Clock Shadow
  • *
  • Posts: 68
Re: Need help with 401k options
« Reply #10 on: January 20, 2017, 07:43:32 AM »
I've got this same terrible 401k, with no match even.  You might want to double check your ERs, as those are the base JH ERs and the adviser for your company may be tacking on additional fees on top of that.

My adviser adds on yet another 0.50 to every one of those ERs in the pdf you provided.  For example, the 500 Index Fund is listed at 0.68% in your pdf, however for me it is actually 1.18 !

Proud Foot

  • Pencil Stache
  • ****
  • Posts: 987
Re: Need help with 401k options
« Reply #11 on: January 20, 2017, 09:27:34 AM »
Yes they are terrible, am i allowed to roll my portion of contributions into my IRA?

I'm going to bring up getting more options with HR tomorrow but I have low expectations that will work anytime soon.  In the meantime I'm dumping 1,308 per month in this thing.  I just picked the 8 or so funds with the highest 10 YR return, and spread them among LC, MC, SC, INT.  But regularly those were at 1.30.

If you talk with HR its not so much the options as you have a lot of options and great options at that, its the additional ER that John Hancock adds on for their administrative fee.  I have JH for my work plan and it is the same as yours.  I would also echo what others have said that you should look at the ER rather than the 10yr returns.  With you wanting LC, MC, SC, and INT here is what I would invest in personally

LC - 500 Index Fund  0.68 ER (pg 7)
MC - Mid Cap Index Fund 0.71 ER (pg 8)
SC - Vanguard Small Cap Grow Index  0.73 ER (pg 7)
INT - Intl Equity Index Fund 0.77 ER (pg 6)

You could also add International through the Vanguard Total World Stock Index (0.85 ER pg 9)

smacpa

  • 5 O'Clock Shadow
  • *
  • Posts: 30
Re: Need help with 401k options
« Reply #12 on: January 20, 2017, 12:23:43 PM »
Thank you all for your responses.  I will catch up on all the links provided and look to rebalance to the lower options.  It's pretty frustrating that I'm selecting VGSAX for .08% on my vanguard account and own it in my 401k for .73%.

The company does provide a 4% match, but I am looking into whether I am allowed per the plan rules to roll funds out of the plan without jeopardizing matches/vesting/suspensions to contributing etc.

smacpa

  • 5 O'Clock Shadow
  • *
  • Posts: 30
Re: Need help with 401k options
« Reply #13 on: January 20, 2017, 02:42:32 PM »
Read this, then come back with your questions

http://jlcollinsnh.com/stock-series/

This is great, I am tearing through them.