http://youtu.be/gvZSpET11ZY
John Oliver on retirement. This should be required viewing for everyone.
http://youtu.be/gvZSpET11ZY
John Oliver on retirement. This should be required viewing for everyone.
Fiduciary: Something everyone should know the meaning of.
The fee's those clowns pile up in the 401k plans are insane. The sickest part is that most people are REQUIRED (if you want a plan that is) to use not only the plans with fees, but the investment buckets they create, which also have fees!
I am very fortunate to have the ability to do a self-directed plan at my work. And yes, it's essentially all in exchange trades index funds.
The one minor note I would make about the advice in the end: The idea of moving into bonds is normally a good one. Not so much right now, bonds are worth almost nothing right now.
aircooled wrote: Fiduciary: Something everyone should know the meaning of. The fee's those clowns pile up in the 401k plans are insane. The sickest part is that most people are REQUIRED (if you want a plan that is) to use not only the plans with fees, but the investment buckets they create, which also have fees! I am very fortunate to have the ability to do a self-directed plan at my work. And yes, it's essentially all in exchange trades index funds. The one minor note I would make about the advice in the end: The idea of moving into bonds is normally a good one. Not so much right now, bonds are worth almost nothing right now.
Yeah. I think my fees are at .38% for the whole thing, maybe a little more, but the overall fee is .33% and the index funds are all around .05%. Makes me miss my old job that didn't give you an option; you got the Vanguard Target Date fund relevant to your age and it was a .07% fee, and that was it.
I should probably max out an IRA after my employer match, but frankly it is just easier to leave it diverted in the 401k.
News at 10: People charge for their services. Why is any of this surprising, or a problem?
Duke wrote: News at 10: **People charge for their services.** Why is any of this surprising, or a problem?
It's a problem that the essentially free fund that is available performs better than the pay for services.
That's kind of the point, here.
If you got something for the fee, it would make sense that there is a fee. But it's very uncommon.
Worse- when your company forces you into a 401K management system that hurts your returns.
One of my buddies at work gets riled about fees too. As he should.
But I keep reminding him that the employer match (6% up to 6k max for us) is WAAAAY bigger than the - admittedly expensive - %1 fee we pay. Now, over time, that %1 can come back and bite you, since the %1 is over the total investment, not the annual investment increase. But the good news is you don't have to put all your savings in the employer sponsored plan. In fact, I put in just enough to get the full match and put the rest of my money elsewhere, just to make sure I am not getting killed by fees.
And yes, people charging for services is standard. but fund management fees are like paying the landscaper %1 of the value of your house every year, regardless of whether any work gets done or not (honestly, it would work as an advantage to some homeowners, but not most). Find an asset manager who charges per hour or per service, just like your lawyer, dentist, mechanic, landscaper, masseuse, barber, contractor, plumber, electrician, driver, etc.
I am once again thankful I'm one of the last with an old fashioned pension for retirement. And in 2 years 10 months, I shall be enjoying it!
The 401K is but an add on toy.
In reply to fox-trapper
I supposedly have one but the State of NY has 15 years to screw that up before I can collect.
Investment strategy is like politics and religion. Everybody has an opinion. The best investment strategy is what works for you. If it's not working, do something about it. But at least have a plan and stick with it. I'm 67 and I retired a couple years ago. From the mid-seventies until a short while ago I handled my own financial future. I made it a hobby. Sometimes I paid a fee for my investments (e.g. DRIP plans for the best dividend paying companies I could find). But I was satisfied that the return justified the fee. (It's amazing what several decades of dividend reinvestment can do for a modest initial investment in a position). I also was a diligent max 401k and IRA investor, and stayed on top of them. Annie is retiring next week and has been a diligent max 401k investor. We had a plan, lived within our means, (that's why I don't have 10-15 car projects in my back yard), and consequently we're in excellent financial shape today. Anyway, what scared the hell out of me when I retired was market downturns. I couldn't know everything. So recently we consolidated everything with a reputable advisor. And yes, we pay a fee for their expertise. They probably don't know everything either, but at least they're better prepared to have some foresight and to react quickly if something happens. We have quarterly meetings to discuss the portfolio and market conditions. I feel better about that. My point is don't get too hung up about investment fees. It's more important to have a plan, stick with it, and live within your means. (Concerning living within your means, read The Thin Green Line by Paul Sullivan. It's an eye- opener The Thin GreenLine).
Funny this comes up now. We have an video conference this Friday for people that are getting close to retirement/medicare (that would be THIS guy).
I wish I had given a E36 M3 about retirement, 401k, etc. long ago. I'm not going to be eating dog food, but there won't be a lot of fun time money.
Went through setting up a 401(k) at my wife's business-- it's amazing how many people have their hand out to be paid, and how many of them are being paid to provide "services" that are required by government regulations intended to insure that you are compliant with government regulations. And I'm talking more about fees paid by the business than the individual employees/investors.
So yeah, the business pays fees to:
The broker, who did do a fair bit of work finding a plan for a very small business
The plan provider/investment firm
A third party compliance company, who assumes liability that the investment company doesn't want to ensure the plan is in compliance with regulations
And then you move on to the fees paid by the individual participants as described by John Oliver.
It's still worth it from a tax standpoint in the end to tax defer a significant portion of her compensation. But the view from my end is that the financial industry gets to make quite a lot of money from the (admitted needed) regulations intended to protect us from the financial industry.
In reply to Karacticus:
The hard part is finding a way to have a 401k that is entirely index fund based. I know they exist- government employees (that I know) system is just index based funds. And they perform really well.
Knowing about Vangard, I wonder if a small company can contact them and find out if they know of that (and I would be they know).
Agreed, it should be required viewing.
Robbie wrote: One of my buddies at work gets riled about fees too. As he should. But I keep reminding him that the employer match (6% up to 6k max for us) is WAAAAY bigger than the - admittedly expensive - %1 fee we pay. Now, over time, that %1 can come back and bite you, since the %1 is over the total investment, not the annual investment increase. But the good news is you don't have to put all your savings in the employer sponsored plan.
The 1% fee will outweigh the additional 6k inside a century (90 years)... but its not quick. If you are maxing your 401k (12k you, 6k company) its more like 59 years. Yes, good news you don't have to put it in that plan, but if you don't, you lose the tax sheltering a 401k offers :(
1% is highway robbery. For you and the company.
Glad my total fees for both my plan and my wifes are in the .1% range. Both use a lot of Vanguard VTSMX which I get for 0.045% or 0.05% depending on plan.
aircooled wrote: The idea of moving into bonds is normally a good one.
This is the one part I would disagree with as well. You want some in bonds for stability.
But, if you can live off the interest alone (4% of your portfolio), no reason to go heavy in bonds, it will just reduce your income.
If you have to withdraw from the principal in retirement, then yes, bonds are important.
ProDarwin wrote: Agreed, it should be required viewing.Robbie wrote: One of my buddies at work gets riled about fees too. As he should. But I keep reminding him that the employer match (6% up to 6k max for us) is WAAAAY bigger than the - admittedly expensive - %1 fee we pay. Now, over time, that %1 can come back and bite you, since the %1 is over the total investment, not the annual investment increase. But the good news is you don't have to put all your savings in the employer sponsored plan.The 1% fee will outweigh the additional 6k inside a century (90 years)... but its not quick. If you are maxing your 401k (12k you, 6k company) its more like 59 years. Yes, good news you don't have to put it in that plan, but if you don't, you lose the tax sheltering a 401k offers :( 1% is highway robbery. For you and the company. Glad my total fees for both my plan and my wifes are in the .1% range. Both use a lot of Vanguard VTSMX which I get for 0.045% or 0.05% depending on plan.
He could max his 401k @ $18,000 plus the employer match of $6k FYI.
Enyar wrote:ProDarwin wrote: Agreed, it should be required viewing.He could max his 401k @ $18,000 plus the employer match of $6k FYI.Robbie wrote: One of my buddies at work gets riled about fees too. As he should. But I keep reminding him that the employer match (6% up to 6k max for us) is WAAAAY bigger than the - admittedly expensive - %1 fee we pay. Now, over time, that %1 can come back and bite you, since the %1 is over the total investment, not the annual investment increase. But the good news is you don't have to put all your savings in the employer sponsored plan.The 1% fee will outweigh the additional 6k inside a century (90 years)... but its not quick. If you are maxing your 401k (12k you, 6k company) its more like 59 years. Yes, good news you don't have to put it in that plan, but if you don't, you lose the tax sheltering a 401k offers :( 1% is highway robbery. For you and the company. Glad my total fees for both my plan and my wifes are in the .1% range. Both use a lot of Vanguard VTSMX which I get for 0.045% or 0.05% depending on plan.
Yeah--throw in 6% for the match--at that point, it doesn't matter what the fees are since you're getting a 100% return on that 6%. After that, it would probably make sense to send the money to an IRA until that is maxed out, then back to the 401k because even with the fees the tax advantages likely still make it the best option available.
Enyar wrote: He could max his 401k @ $18,000 plus the employer match of $6k FYI.
Huh?
Limit is $18,000 whether it comes from you or the employer. $24,000 if you are over age 50.
If you mean that he could put in $18k to max it then get the $6K match on top of that... yes, but it wouldn't be tax sheltered so there would be no point. That's why I just stopped the theoretical example at $12k
ProDarwin wrote:Enyar wrote: He could max his 401k @ $18,000 plus the employer match of $6k FYI.Huh? Limit is $18,000 whether it comes from you or the employer. $24,000 if you are over age 50. If you mean that he could put in $18k to max it *then* get the $6K match on top of that... yes, but it wouldn't be tax sheltered so there would be no point. That's why I just stopped the theoretical example at $12k
Nope, you've got something wrong here. Employer match does not count against your max. Your annual contributions can be up to $53,000 total (or $59,000 if you're over 50). The participant can only put in $18k (or $24k); the match is gravy.
berkeley. Don't know how I missed that.
/logs into 401k account immediately
ProDarwin wrote:
That's what we're here for! Better to find out now than 15 years from now!
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