Author Topic: Only 401k offered is John Hancock *no match  (Read 1734 times)

zoochadookdook

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Only 401k offered is John Hancock *no match
« on: January 24, 2020, 01:36:17 PM »
Hi all
My company offers no match and just John Hancock for a 401k. I understand I may as well take advantage of the tax savings and max it; but most all the funds have much higher fees than my vanguard roth ira (target date 2060).

Any advice on which ones to pick?

About me:
27.
No 401k.
150k liquid
40k roth ira (vanguard)
3500 hsa (2019 contribution)
New job 65k/year.

Savings/extra after healthcare/hsa contribution/living expenses- around 3000/month.
Month

bacchi

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Re: Only 401k offered is John Hancock *no match
« Reply #1 on: January 24, 2020, 01:38:50 PM »
The cheapest market/S&P fund they offer.

And then work on a proposal for HR to move to a better 401k manager.

dandarc

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Re: Only 401k offered is John Hancock *no match
« Reply #2 on: January 24, 2020, 01:41:20 PM »
Read your plan documents carefully - you may be able to do in-service rollovers to get into better funds.

PDXTabs

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Re: Only 401k offered is John Hancock *no match
« Reply #3 on: January 24, 2020, 01:42:41 PM »
I'm in a similar situation and I still max that bad boy out. For further reading see bogleheads wiki on mediocre 401k.

EliteZags

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Re: Only 401k offered is John Hancock *no match
« Reply #4 on: January 24, 2020, 03:04:18 PM »
I had Hancock previously and just defaulted into target date for years, then it transferred to Fidelity same fund but recently realized it had 0.3% ER and close to 40% international stock, so I've been gradually shifting portions over to their "US Equity Index" with 0.02% ER
usually all plans will have at least one index representing either total stock or S&P with a reasonable ER (and also a bond one), even if it's not made obvious as a choice

ChpBstrd

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Re: Only 401k offered is John Hancock *no match
« Reply #5 on: January 27, 2020, 10:54:59 AM »
Anonymously send your CFO/controllerís contact information to a Vanguard sales rep.

zoochadookdook

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Re: Only 401k offered is John Hancock *no match
« Reply #6 on: January 28, 2020, 01:03:08 PM »
To elaborate:

They offer all target date funds JH Multi-Index 2060 Preserv JH Multi-Index 2055 Preserv JH Multi-Index 2050 Preserv JH Multi-Index 2045 Preserv JH Multi-Index 2040 Preserv JH Multi-Index 2035 Preserv JH Multi-Index 2030 Preserv JH Multi-Index 2025 Preserv JH Multi-Index 2020 Preserv

Multiple funds are offered in a "build your own portfolio option as well

American Century Heritage DFA Intl Small Cap Value DFA U.S. Small Cap Fund Intl Equity Index Fund Invesco Small Cap Growth JPMorgan Intrepid Mid Cap Mid Cap Index Fund Northern Small Cap Value Fund Small Cap Index Fund WisdomTree MidCap Dividend ETF

500 Index Fund Capital World Growth & Income Fidelity ContraFund New Perspective Fund Investment Company of America Vanguard Value Index Fund

John Hancock Bond Fund Total Bond Market Fund

John Hancock Stable Val

EliteZags

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Re: Only 401k offered is John Hancock *no match
« Reply #7 on: January 28, 2020, 04:07:30 PM »
I'm guessing the 500 index fund (as well as Total Bond Fund) are the sub 0.1% ER ones out of those? 

Simpli-Fi

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Re: Only 401k offered is John Hancock *no match
« Reply #8 on: January 28, 2020, 10:51:23 PM »
150k liquid?  Are those invested?

jinga nation

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Re: Only 401k offered is John Hancock *no match
« Reply #9 on: January 31, 2020, 09:41:18 AM »
@zoochadookdook how many employees in your workplace?

See my post here, it may help. I used those spreadsheets and data to make my small business employer switch from MuricanFundz to Guideline (mostly Vanguard funds).

https://forum.mrmoneymustache.com/antimustachian-wall-of-shame-and-comedy/overheard-at-work-the-anti-antimustachian-edition/msg2522176/#msg2522176

zoochadookdook

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Re: Only 401k offered is John Hancock *no match
« Reply #10 on: January 31, 2020, 12:29:15 PM »
@zoochadookdook how many employees in your workplace?

See my post here, it may help. I used those spreadsheets and data to make my small business employer switch from MuricanFundz to Guideline (mostly Vanguard funds).

https://forum.mrmoneymustache.com/antimustachian-wall-of-shame-and-comedy/overheard-at-work-the-anti-antimustachian-edition/msg2522176/#msg2522176

Great stuff; I'll have to check. Not sure how many as I'm a contactor but i believe we're in the 100-200 range.

zoochadookdook

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Re: Only 401k offered is John Hancock *no match
« Reply #11 on: January 31, 2020, 12:30:13 PM »
150k liquid?  Are those invested?

Ok well "60K" liquid, 90k to be aquired end of february (house closes then on the sale and that's my net after). Just HYSA

MustacheAndaHalf

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Re: Only 401k offered is John Hancock *no match
« Reply #12 on: February 02, 2020, 07:04:05 AM »
They offer all target date funds JH Multi-Index 2060 Preserv ...
On morningstar, that fund is listed as having a 0.37% expense ratio:
https://www.morningstar.com/funds/xnas/jtfox/quote

That's reasonable for a target date fund - I'd be fine with that.  What is your 401(k) plan showing for the expense ratio? 

Hargrove

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Re: Only 401k offered is John Hancock *no match
« Reply #13 on: February 02, 2020, 01:29:53 PM »
Just a warning... by now, almost everyone with a 401k seems to sagely recommend you look at your expense ratios. This does not escape the marketers' attention.

There are SEVERAL primary places to look for fees, and only one of these fees, the expense ratio, is likely to be particularly low at this point.

John Hancock, in a plan I was in, had expense ratios that were all better than the Vanguard equivalent offered in the same plan. However, they kept 10-12% of the money in cash, which amounts to not investing 10-12% of your money so they can loan it out for profit, instead. This should be considered a fee of over 1%.

Then add the expense ratio, but be careful to use the plan's prospectus - you can't look up the fund, because Hancock, at least in my plan, used a shifty "sub-account" feature whereby you didn't invest directly in funds, you invested in Hancock accounts directed to invest in funds (only, they would not invest everything, and expense ratios magically favored Hancock). Then add the administrative fees, generally over 1% (as in this plan, but they were listed in multiple parts). Plus the service event fees, if you incurred any...

Without a match, I wouldn't invest in a Hancock plan. 3% on 100k is $3000, but not one-time. That 3k is going to get taxed out every year you're in the plan. Basically, you can't just calculate what you save the year you put it in - you have to also calculate what you keep losing on all the money you already have in there.
« Last Edit: February 02, 2020, 01:36:41 PM by Hargrove »

zoochadookdook

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Re: Only 401k offered is John Hancock *no match
« Reply #14 on: February 03, 2020, 10:13:35 AM »
Just a warning... by now, almost everyone with a 401k seems to sagely recommend you look at your expense ratios. This does not escape the marketers' attention.

There are SEVERAL primary places to look for fees, and only one of these fees, the expense ratio, is likely to be particularly low at this point.

John Hancock, in a plan I was in, had expense ratios that were all better than the Vanguard equivalent offered in the same plan. However, they kept 10-12% of the money in cash, which amounts to not investing 10-12% of your money so they can loan it out for profit, instead. This should be considered a fee of over 1%.

Then add the expense ratio, but be careful to use the plan's prospectus - you can't look up the fund, because Hancock, at least in my plan, used a shifty "sub-account" feature whereby you didn't invest directly in funds, you invested in Hancock accounts directed to invest in funds (only, they would not invest everything, and expense ratios magically favored Hancock). Then add the administrative fees, generally over 1% (as in this plan, but they were listed in multiple parts). Plus the service event fees, if you incurred any...

Without a match, I wouldn't invest in a Hancock plan. 3% on 100k is $3000, but not one-time. That 3k is going to get taxed out every year you're in the plan. Basically, you can't just calculate what you save the year you put it in - you have to also calculate what you keep losing on all the money you already have in there.

Got it, So would you recomend a SEP or just throwing it all in a taxable brokerage? Not sure the rules on a SEP (I still own a LLC but this year it's been pretty low as I've been mainly working this new job)

PDXTabs

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Re: Only 401k offered is John Hancock *no match
« Reply #15 on: February 03, 2020, 10:25:33 AM »
Without a match, I wouldn't invest in a Hancock plan. 3% on 100k is $3000, but not one-time. That 3k is going to get taxed out every year you're in the plan. Basically, you can't just calculate what you save the year you put it in - you have to also calculate what you keep losing on all the money you already have in there.

Sure, but when you first start a job you have $0 in the 401k. My marginal tax rate is 24% federal + 9% state = 33%, so when I max out my 401k this year I'll save $6435 on taxes, but a hypothetical 3% fee would only eat into my 401k ~$300 the first year. There is always time for me to leave and get a better job with a better 401k later.

dandarc

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Re: Only 401k offered is John Hancock *no match
« Reply #16 on: February 03, 2020, 10:39:44 AM »
Without a match, I wouldn't invest in a Hancock plan. 3% on 100k is $3000, but not one-time. That 3k is going to get taxed out every year you're in the plan. Basically, you can't just calculate what you save the year you put it in - you have to also calculate what you keep losing on all the money you already have in there.

Sure, but when you first start a job you have $0 in the 401k. My marginal tax rate is 24% federal + 9% state = 33%, so when I max out my 401k this year I'll save $6435 on taxes, but a hypothetical 3% fee would only eat into my 401k ~$300 the first year. There is always time for me to leave and get a better job with a better 401k later.
Yep - 401K typically is not forever, and the tax savings can be large. Bring up how bad it is with management and they might come around and change it in a few years. You might get a new job. Bad 401K might well allow in-services rollovers to IRAs. Lots of ways that you're likely not paying absurd fees forever.

Hargrove

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Re: Only 401k offered is John Hancock *no match
« Reply #17 on: February 03, 2020, 06:48:50 PM »
So the variables to narrow as best you can are

whether in-service conversions are allowed
if you love the job
if you think management will change the plan

As others point out, you take a ton of tax savings while your balance is low, irrespective of fees. If you have in-service conversions, definitely take the 401k, and just convert annually (or more often if they let you).

Without conversions, you create a liability by running up a savings balance to get chewed on. The problem is if you love the job and stay employed and making max contributions beyond 6 years, you're starting down the other side of the savings hill. I wouldn't want to play that kind of chicken, but YMMV - the Bureau of Labor Statistics supposedly puts average tenure between 4 and 4.3 years, so odds are better than half you save money with the 401k using PDXTabs' margin numbers.

https://www.thebalancecareers.com/how-often-do-people-change-jobs-2060467

SEP, from the sounds of it, wouldn't work because you don't pay yourself enough from the LLC, so you wouldn't be able to contribute enough for it to be a replacement.