Company Changing 401k Providers...Also Gross vs Net Expenses

[JJP]

A quick rundown...

My company is changing 401k providers from Principal to Schwab. The company matches 2.5% currently, and I'm putting in 15% into the 2055 fund at Principal, which has been doing well, and is only .39% expense ratio. The new plan is the BlackRock LifePath 2055 (LIVAX). It has a gross expense ratio of 8.70% (yes, that's correct), and a Net Expense Ratio of .54%. Which one will be the actual one used? MorningStar says the following:

Gross expense ratio: This is the actual fund expenses as stated in the fund prospectus.
Net expense ratio: This is the net fund expenses after any expenses were waived and/or partially absorbed by fund management.

I received a number of mailings from Schwab recently about the changeover. One form lists the operating expense of .54 and another lists it as 8.7. What the heck is going on here?

I'm considering just tossing in the 3% to match into Schwab and starting my own 401k with Vanguard at a .18% ratio. Is it that easy?

If it matters, I'm currently doing a Roth deferred 401k through Principal because I don't make a lot. I'm not sure if Schwab will keep that, but I haven't received any indication otherwise.

[mhc]

I doubt the 8.7% is correct. It must be an error. Give it a little time to fix itself, and then ask again.

The net ER is what you will be paying.

You can't just set up your own 401k. You can though contribute enough to the 401k to get your match and then look at getting a Roth IRA at Vanguard.

[JJP]

I doubt the 8.7% is correct. It must be an error. Give it a little time to fix itself, and then ask again.

The net ER is what you will be paying.

You can't just set up your own 401k. You can though contribute enough to the 401k to get your match and then look at getting a Roth IRA at Vanguard.

Thanks for the info. I'm still new to all of this. The company just put out a new memo saying that the net ER is the correct one. I'll look into doing the Vanguard Roth. Anyone have any recommendations in regards to Schwab vs. Vanguard for a 2055 retirement date Roth?

[moneytobless]

Hi JJP,

Just based on the expense ratios alone (.18% vs .83%), I'd go with Vanguard.

https://personal.vanguard.com/us/funds/snapshot?FundId=1487&FundIntExt=INT

http://www.schwab.com/public/schwab/investing/investment_help/investment_research/mutual_fund_research/mutual_funds.html?path=%2fProspect%2fResearch%2fMutualFunds%2fSummary.asp%3fsymbol%3dSWORX

[Jeff7]

Link to the fund's "fact sheet" at BlackRock (PDF)

On the right is an Annual Operating Expenses table, which shows that 8.70% figure.



And hopefully this one works: Prospectus. (PDF)

[Boglenaut]

Link to the fund's "fact sheet" at BlackRock (PDF)

On the right is an Annual Operating Expenses table, which shows that 8.70% figure.

I bet it has something to do with it being a new fund...some initial cost that they are not passing along. but that's just a guess.

Overall though, I am not impressed by this fund.