Author Topic: Help with bad 401k choices  (Read 786 times)

Patrick584

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Help with bad 401k choices
« on: August 22, 2018, 07:47:40 PM »
Iím starting a new job with terrible 401k funds. The two best options are a s&p500 index with a ER 0.46 and vandguard explorer admiral with ER 0.32. I donít plan on being with the company long enough for 401k to exceed 10% of net worth. Is the vanguard fund a reasonable choice? I already have a slight tilt towards small stocks in other tax deferred accounts that I can switch to equal weight. I hate to pay so much more for the Index fund while the vanguard fund is only modestly more than a small cap index fund.

reeshau

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Re: Help with bad 401k choices
« Reply #1 on: August 23, 2018, 02:23:52 AM »
Are you getting some kind of match?  You are comparing the costs to an outside fund, but to decide whether it is "worth it" or not, you have to include all the economics.  Other than that, you are right to look at your relative choices within the plan.  You also say you don't think you will be around for a long time, so, if there is a match, then take it and make sure to roll it over to an IRA at the first opportunity.

I wouldn't blame the funds, themselves.  Since you name the Vanguard fund, we know the Admiral shares have a .31% cost.  So the costs you see are showing you the 401k management fees on top.  It is strange that an S&P fund would have a higher cost, but you can see overtly what it costs the company to run the program.  (and the fact that you are paying for that)  Neither of these funds gets you much international exposure, but you're right to characterize Explorer as a small / midcap fund.  So, using these two to reach your desired representation of small/mid and large caps is fine.

You could also ask the plan administrator if in-service rollovers are available, and roll over sooner than that.  But often those are limited, i.e. only once, only up to 50% of the value, and only if you are 50.  But it doesn't hurt to ask.

MDM

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Re: Help with bad 401k choices
« Reply #2 on: August 24, 2018, 11:33:49 AM »

PDXTabs

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Re: Help with bad 401k choices
« Reply #3 on: August 24, 2018, 11:44:36 AM »
I wouldn't call those bad. I'm paying 1.80% for a Russel 1000 "index" fund. I would max that bad boy out and count the days until you are sipping vino verde in southern Europe.

Also, check out Expensive or mediocre choices on the bogleheads wiki.
« Last Edit: August 26, 2018, 06:41:13 PM by PDXTabs »