No dividends in 401k Plan?

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Topic Author
Markr867
Posts: 103
Joined: Sat Mar 29, 2014 6:12 am

No dividends in 401k Plan?

Post by Markr867 »

Emergency funds: $10,000 right now. (This represents about 5 months of expenses, but I'm comfortable with this amount.)
Debt: $15,900 in student loans at 0%. (My parents paid them off and I'm paying them back.)
Tax Filing Status: Single
Tax Rate: 25% Federal, 5.75% State
State of Residence: Virginia
Age: 25
Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: Unsure

Current retirement assets

401k - $11,850
100% LifePath Index 2055 Non-Lendable Fund F (No ticker.. more on that later) (0.02% ER)

Roth IRA at Vanguard - $12,650
100% Vanguard Target Retirement 2055 Fund (VFFVX) (0.18% ER)

Total: $24,500

Contributions

New annual Contributions
$3,900 annually into 401k (This is 6% of my salary - the max to get the company match. My employer will match dollar for dollar up to 6%, but I do not get it until the end of the year)
$5,500 annually into Roth IRA

Total: $9,400 annually (with another $3,900 from my employer)

Available funds

Funds available in 401(k)
*Note: no ticker symbols exist for these funds, according to the account representative I talked to today.

Stable Value Fund (Cannot find ER)
Bond Fund (Cannot find ER)
SSgA S&P 500 Index Fund – Class A (0.01% ER)
US Structured Research Strategy (0.00% ER)
Russell 1000 Value Index Fund (0.02% ER)
Russell 1000 Growth Index Fund (0.02% ER)
SSgA Russell Small Cap Index Fund - Class A (0.02% ER)
EuroPacific Growth Fund (0.55% ER)
EAFE Stock Index Fund (0.04% ER)
LifePath Retirement Income (0.02% ER)
LifePath 2015 (0.02% ER)
LifePath 2020 (0.02% ER)
LifePath 2025 (0.02% ER)
LifePath 2030 (0.02% ER)
LifePath 2035 (0.02% ER)
LifePath 2040 (0.02% ER)
LifePath 2045 (0.02% ER)
LifePath 2050 (0.02% ER)
LifePath 2055 (0.02% ER)
SSgA Real Asset Fund (0.05% ER)

Question
So a few months ago I got a job at my company, and before I even started, I heard from friends/people online that their 401k plan is fantastic and one of the best out there. I went with one of the LifePath funds with an expense ratio of 0.02% and I've left it alone since then. This morning, out of curiosity, I logged on to the plan's website to check the dividend rates for the different funds. I couldn't find anything on the site, so I called customer service. She told me that none of the funds in my company's 401k plan offer dividends (I also found out none of the funds have ticker symbols to track their performance, which I thought was weird, but that's off-topic). I was a little surprised to find out this information, as I was under the impression that dividends were a major factor in compounding over long periods of time (I'm only 25, so I'm trying to position myself well now).

Should the fact that I'm not getting any type of dividend from these funds affect my investing strategy? The company matches dollar to dollar up to 6%, and you get the match in one lump sum as long as you are employed on December 31. It is also vested immediately. I'm obviously going to keep contributing up to 6% to get the match, but I was planning on increasing my contribution rate on January 1. Should I look into other types of investments outside of the 401k if I'm not getting any type of dividend? Or does the tax break and the low ER outweigh the fact that I'm not getting dividends?

Sorry if this is a stupid question, but I've had a Roth for a few years, and I can already see the dividends starting to increase through compounding. Hearing that no funds in the 401k paid dividends made me stop and wonder.

[Name of company (personally identifiable information) removed by admin LadyGeek]
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Barry Barnitz
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Re: No dividends in 401k Plan?

Post by Barry Barnitz »

Hi:

Check with your plan administrator to see if the fund selections in your 401k plan are what are known as Collective Investment Trusts (CITs).

See ---> What is a Collective Investment Trust ? | Bogleheads® Blog for an introduction.
Also--->Collective Investment Trusts - Bogleheads for more background.
Vanguard opinion piece ---> Vanguard - How collective trusts stack up against institutional funds

Collective trusts accumulate dividends and capital gains in the fund's Net Asset Value (NAV). They do not have annual reports or prospectus, but will have a fact sheet detailing strategy, performance and expenses.

By the way both Blackrock and Vanguard offer CITs:

Defined Contribution | BlackRock
Vanguard - Quarter-end performance

regards,
Additional administrative tasks: Financial Page bogleheads.org. blog; finiki the Canadian wiki; The Bogle Center for Financial Literacy site; La Guía Bogleheads® España site.
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LadyGeek
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Re: No dividends in 401k Plan?

Post by LadyGeek »

Hi,

I removed the name of your employer, as it's personally identifiable information. This forum is heavily indexed by google, so financial information posted here can be linked with other personal information found elsewhere.

Also, we don't need the name of your company to answer your questions. "Company stock" is sufficient.

I sent you a PM with a link to your employer's stock info. To everyone else, this is a publicly traded stock which pays dividends.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Topic Author
Markr867
Posts: 103
Joined: Sat Mar 29, 2014 6:12 am

Re: No dividends in 401k Plan?

Post by Markr867 »

LadyGeek wrote:Hi,

I removed the name of your employer, as it's personally identifiable information. This forum is heavily indexed by google, so financial information posted here can be linked with other personal information found elsewhere.

Also, we don't need the name of your company to answer your questions. "Company stock" is sufficient.

I sent you a PM with a link to your employer's stock info. To everyone else, this is a publicly traded stock which pays dividends.
Sorry about that, LadyGeek. Should have read the forum rules closer.

Yes, the company stock is publicly traded and pays dividends, but that is not what is offered in the 401k and not what I am invested in. If we want to buy company stock, we can do so at a discount, but it is a completely different plan. (ESOP, I believe)
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The529guy
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Re: No dividends in 401k Plan?

Post by The529guy »

Markr867 wrote:She told me that none of the funds in my company's 401k plan offer dividends (I also found out none of the funds have ticker symbols to track their performance, which I thought was weird, but that's off-topic).
It is not a stupid question. It means you're paying attention.

Like Barry wrote, your dividend growth is likely built into the fund price. Instead of explicitly distributing a dividend, a fund's NAV would just increase by the dividend amount. Check this out: http://www.cirsplans.com/Fact-Sheets/fc ... lass_A.pdf
SSgA S&P 500 Index Fund Class A represents units of ownership in the SSgA S&P 500 Index Non-Lending Series Fund.
It's like how the Total Stock Market fund that I hold in a 529 plan never distributes dividends, even though the underlying fund (Vanguard Institutional Total Stock Market Index Fund Institutional Shares) does pay them.
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LadyGeek
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Re: No dividends in 401k Plan?

Post by LadyGeek »

Markr867 wrote:Sorry about that, LadyGeek. Should have read the forum rules closer.
No problem. There are no rules on what type of information to post, the intent is to let members know that their information is not as anonymous as they think.
Markr867 wrote: (I also found out none of the funds have ticker symbols to track their performance, which I thought was weird, but that's off-topic).
Actually, that's very much on-topic. What you're missing is that many employers create their own funds, which can be considered as a "private fund." All that means is that you don't have a ticker symbol for E-Z lookup. Instead, you just need to do a little research.

First, get the fund's "fact sheet" which lists the composition of the asset classes. What's the percentage of stocks (US and international), bonds, etc.? Then, look for the benchmark (index) that it tracks. Finally, the expense ratio. That should be enough information for us to figure out what to do.
Markr867 wrote:Yes, the company stock is publicly traded and pays dividends, but that is not what is offered in the 401k and not what I am invested in. If we want to buy company stock, we can do so at a discount, but it is a completely different plan. (ESOP, I believe)
Understood, I wanted to be sure you had the basic info - which was in my PM to you.

You already have one possible answer. If you don't understand anything, be sure to say so and we'll try again.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Topic Author
Markr867
Posts: 103
Joined: Sat Mar 29, 2014 6:12 am

Re: No dividends in 401k Plan?

Post by Markr867 »

First off, thank you for the replies so far! I was not aware such a thing existed, and I'm enjoying learning about it.

The fact sheet that The529Guy posted looks identical to the fact sheet for one of the choices I have (the SSgA S&P 500 Index Fund - Class A). I see now where it says dividend yield on there.

However, the fact sheet for the fund I'm in (LifePath 2055) does not have a nice table that also includes the divided yield. But it does say in the disclosure that it is a "collective investment fund," so I'm assuming it is the same type of fund.
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