Author Topic: The funds in 4xx are getting expensive  (Read 2947 times)

mbk

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The funds in 4xx are getting expensive
« on: April 27, 2015, 08:05:52 PM »
<begin-rant>
In the name of streamlining, the Univ. of California is eliminating low cost Fidelity spartan funds with super-low expenses in the range 0.025-0.05%. For some of the eliminated funds like Spartan Total-Market, there are no alternatives left. In the remnant funds, there are no funds tracking SP500 either.
<end-rant>
Now the only funds worth looking at are UC domestic equity, UC Global Equity Funds, and UC International Equity Index fund. They all have expense ratio of 0.15%.

My money is currently in three accounts: a) 403b (14k), b) 457b (21k) and c) UC Defined Contribution Plan (20k).
I will be leaving my current position in 4 months. Is it better if I leave the money in the above mentioned funds and hope Spartan funds will return some day? Or is it better to transfer the money to IRA and use the eliminated spartan funds which have slightly higher expenses? I am asking this because 4xx funds are more secure than IRAs. Also the 457b account has the option of penalty-less withdrawal.

The expense ratio for UC International Equity fund at 0.15% seems low for getting international exposure. Is it better to leave some amount (min. required in the account) in the UC International Fund?

My current line of thinking is to move all the money in UC 457b to International Equity Fund and move the money in 403b and UC DCP to IRA and buy spartan funds.
This makes the portfolio over-exposed to international stocks. However, over time, I intend to make the overall portfolio more US centric.
Are there any holes in my logic?

Thanks





seattlecyclone

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Re: The funds in 4xx are getting expensive
« Reply #1 on: April 27, 2015, 10:25:07 PM »
Transferring the 403(b) to an IRA sounds like a good plan. You'll be able to invest in some low-cost funds. It's possible that the UC 403(b) plan will get some funds someday that have lower expense ratios than their Vanguard Admiral counterparts, but I wouldn't wait around for that to happen.

I would keep the 457, though. It has a nice feature of being able to withdraw at any age with no early withdrawal penalties, and I think it's totally worth paying a 0.15% expense ratio to get that feature. If you're concerned about having too high of an international exposure, put some of the money in the UC domestic equity fund. 0.15% for a domestic fund isn't terrible.

mbk

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Re: The funds in 4xx are getting expensive
« Reply #2 on: April 28, 2015, 10:01:17 AM »
Thanks.  In that case, I will maintain my current allocations in 457b and transfer the rest into IRA.  VG small cap and reit funds are left alone. That gives some flexibility in lowering costs.

Scandium

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Re: The funds in 4xx are getting expensive
« Reply #3 on: April 29, 2015, 07:13:06 AM »
I'm not a fan of the IRA option, as it prevents you from doing a back door Roth if you're over the income limit. 0.15% is not really that much. A difference of $100 per $100k in your account, compared to Vanguard. Depends on if you think that's worth it I guess. But if you get another job with a 401k or 457 you may be able to roll this into that.