Author Topic: Vanguard vs Employer Retirment Options  (Read 529 times)

LearningMustachian72

  • 5 O'Clock Shadow
  • *
  • Posts: 54
Vanguard vs Employer Retirment Options
« on: July 15, 2019, 10:23:06 AM »
Hey,

Looking to put 100% in a low cost index fund.  My employer has a S&P 500 index with 0.013% fees versus the VSTAX with 0.04%.

The returns are as follows:

VSTAX (1 year - 8.99, 5 year - 10.17 and 10 year - 14.71)
Employer (1 year - 17.89, 5 year - 13.93 and 10 year - 11.99)

Would there be any advantage of having my funds in Vanguard over my employers besides more investment options that I am not thinking of?
« Last Edit: July 15, 2019, 10:28:35 AM by LearningMustachian72 »

terran

  • Handlebar Stache
  • *****
  • Posts: 2256
Re: Vanguard vs Employer Retirment Options
« Reply #1 on: July 15, 2019, 10:36:26 AM »
No, you should absolutely contribute to a workplace retirement plan with low cost index funds before you contribute to a taxable account at Vanguard. You may want to contribute to an IRA at vanguard before contributing your workplace retirement plan (except for the match, always contribute enough to get the match). In that case you can use the IRA to fill out your asset allocation with mid and small caps so your overall allocation approximates the total stock market (which is what VTSAX does). For that see https://www.bogleheads.org/wiki/Approximating_total_stock_market

LearningMustachian72

  • 5 O'Clock Shadow
  • *
  • Posts: 54
Re: Vanguard vs Employer Retirment Options
« Reply #2 on: July 15, 2019, 10:41:06 AM »
Thank you for this!

I should have been more clear...I meant rolling over to a Traditional IRA at Vanguard or rolling over to my new employer 401k.

My new employer also has a mid cap index fund with fees of 0.025% and small cap at 0.035%.

That link you sent me is very helpful...based on that, I am thinking of going something like 80% large cap index, 10% mid and 10% small to broaden my investments.

LearningMustachian72

  • 5 O'Clock Shadow
  • *
  • Posts: 54
Re: Vanguard vs Employer Retirment Options
« Reply #3 on: July 17, 2019, 03:04:48 PM »
@terran

Would you roll over to a Vanguard IRA with 0.04% fees or rollover to new employer 401k plan, which has lower fees of the following?

large cap index fund -  0.013%
mid cap index fund - 0.025%
small cap index fund - 0.035%

I was set on rolling over to traditional IRA until I saw how low my new employers fees are.

terran

  • Handlebar Stache
  • *****
  • Posts: 2256
Re: Vanguard vs Employer Retirment Options
« Reply #4 on: July 17, 2019, 04:02:19 PM »
Ah, I see. If it was already at Vanguard I wouldn't bother moving it (for now at least), but since you have excellent options in your 401(k) if you're rolling it over anyway I would probably roll it over to the 401(k). Not because of fees though -- not a big enough difference to worry about. The reason I would roll it over to the 401(k) is so you can make backdoor Roth contributions if you ever need to. You don't need to worry about that now (unless you do) but you'll know when you need to because you're income will be too high to contribute directly to a Roth IRA.

FIREstache

  • Pencil Stache
  • ****
  • Posts: 640
Re: Vanguard vs Employer Retirment Options
« Reply #5 on: July 17, 2019, 04:26:10 PM »

Work retirement plans usually have an administration fee that they take right off the top, that's in addition to the fund expense ratios.  I used to work somewhere that charged about .75% for an admin fee and still pay around .3% in addition to the fund expense ratios.

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5014
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: Vanguard vs Employer Retirment Options
« Reply #6 on: July 17, 2019, 04:33:07 PM »

Work retirement plans usually have an administration fee that they take right off the top, that's in addition to the fund expense ratios.  I used to work somewhere that charged about .75% for an admin fee and still pay around .3% in addition to the fund expense ratios.

This really depends. My employer's 401(k) has a flat quarterly administration fee that doesn't depend on assets under management. My wife's was the same story. I've also had past employers that ate the administration fees, at least for current employees. They were happy to charge former employees. :-)

terran

  • Handlebar Stache
  • *****
  • Posts: 2256
Re: Vanguard vs Employer Retirment Options
« Reply #7 on: July 17, 2019, 04:56:31 PM »

Work retirement plans usually have an administration fee that they take right off the top, that's in addition to the fund expense ratios.  I used to work somewhere that charged about .75% for an admin fee and still pay around .3% in addition to the fund expense ratios.

This really depends. My employer's 401(k) has a flat quarterly administration fee that doesn't depend on assets under management. My wife's was the same story. I've also had past employers that ate the administration fees, at least for current employees. They were happy to charge former employees. :-)

Good point, don't move the IRA there if that's the case, though as @seattlecyclone says it's not universal. My experience is with 403(b)'s though, which so far haven't had such fees.