My Wife's 401k is expensive.

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SpicyUnagi
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My Wife's 401k is expensive.

Post by SpicyUnagi »

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Last edited by SpicyUnagi on Tue Jan 20, 2015 9:49 am, edited 1 time in total.
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Dutch
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Re: My Wife's 401k is expensive.

Post by Dutch »

Don't even bother talking to the "advisor". His income depends on not understanding the points you are trying to make.

In fact, it's a safe bet that you're paying at least 1% just for the "advisor"
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SpicyUnagi
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Re: My Wife's 401k is expensive.

Post by SpicyUnagi »

Dutch wrote:Don't even bother talking to the "advisor". His income depends on not understanding the points you are trying to make.

In fact, it's a safe bet that you're paying at least 1% just for the "advisor"
The only way I can see past that is having her talk to her boss, who runs the company. If that doesn't change anything, I don't think it's a good idea to complain to FINRA that the 401k plan is taking advantage of her and the other employees. I can't have her lose her job, of course...

Is there anything else I can do?
HurdyGurdy
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Re: My Wife's 401k is expensive.

Post by HurdyGurdy »

SpicyUnagi wrote:I need to know how I can actually track the growth on $10,000 as a benchmark, minus fees, that show PIXCX has done worse than VFINX. Mind this is only 1 fund in the whole lineup that seems to have "outperformed".
I can't find any charts disproving that PIXCX has outperformed VFINX (VG 500 INDEX) since it's 5 yr, 10 yr, and inception benchmarks. How can I prove that on a cost adjusted basis, this fund is more expensive, and hurting my wife's retirement account?
You can't do that. Many funds do better than the S&P500, by luck or by taking more risk. I have not seen it, but perhaps PIXCX was one of them. Problem is, he can't guarantee that it will do as well going forward.

VFINX can guarantee only a very simple thing: that you'll get the market returns, minus 0.1% in annual costs.

Ask, if they are so good and are sure to provide above market returns, if they can guarantee a very simple goal -- market returns minus small costs.

Realistically there may not be much that you can do. A good page is in http://www.bogleheads.org/wiki/How_to_C ... _401k_Plan
leonard
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Re: My Wife's 401k is expensive.

Post by leonard »

SpicyUnagi wrote:I have been going back and forth with my wife's 401k advisor at ameriprise trying to prove that his high cost funds (100-250 basis points, 1%-2.5%, both equity and bond funds) do not benefit my wife's retirement investments, and actually cost her more in the long run.

I have asked why there are no low-cost alternatives, such as from Vanguard, Charles Schwab, or Fidelity, and I am awaiting his response. I thankfully have a plan at work that has a bunch of low cost investments from Vanguard, but I can't stand the fact that my wife is probably being charged more than 3% a year when I finally find out how the advisor is being compensated, or how much Ameriprise is charging that doesn't show up in the normal paperwork.

I have also asked the advisor if he has signed a pledge that he is a fiduciary to the 401k plan, which in light of the above, tells me he isn't. I could not find any paperwork from her company that states he is a fiduciary.

This advisor gave me an example of an active mutual fund in the plan that has done better than the S&P 500 Index that it intends to exceed. PIXCX is this fund. I already know he is trying to dissuade my wife by showing magic numbers that show the return exceeding the 500 Index, but it doesn't include the subtraction of fees. I need to know how I can actually track the growth on $10,000 as a benchmark, minus fees, that show PIXCX has done worse than VFINX. Mind this is only 1 fund in the whole lineup that seems to have "outperformed".

I can't find any charts disproving that PIXCX has outperformed VFINX (VG 500 INDEX) since it's 5 yr, 10 yr, and inception benchmarks. How can I prove that on a cost adjusted basis, this fund is more expensive, and hurting my wife's retirement account?

I hope to be able to have my wife bring this to her superiors at some point, if he is unwilling to make changes himself. It is not only hurting her, it is hurting the whole company. She works for a smaller firm, and I feel they are being taken advantage of. The problem is, I can't have my wife come off as "attacking", or complain to FINRA that the 401k plan is taking advantage of the employees, as it would make her look bad.

I would appreciate some help on this.

Thank you.
Ameriprise doesn't decide what the plan offers. The company owner, plan trustee, 401k administrator, or 401k committee (or some combination there of) are the ones that decide what fund options are offered. Arguing with the ameriprise contact for the plan is a waste of time. Concerns should be addressed by your wife to the appropriate plan administrator in the business.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.
LeeMKE
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Re: My Wife's 401k is expensive.

Post by LeeMKE »

The only other thing to do is contribute to get the match, and put all other savings in an IRA or Roth IRA for her. Then, when she moves to another firm, rollover the remains into her own self-directed IRA.

I wasn't nearly so clear as all of you about the issues with my 401K at various employers. I just knew my employers weren't as concerned about my retirement as I was, and frankly, I usually had plenty of reason to know they weren't likely to make good investment choices on my behalf. I'd just bid my time, knowing I'd move on and take the account with me when I went.

The first time I learned this lesson, I'd left my 401K invested with my employer when I accepted another position. About a year after I'd left, the CEO threw a fit when he realized he was paying a fee on all the 401K deposits made by previous employees. They sent us a letter, informing us that we'd be assessed a big fee (3%/year??) if our funds remained there. So, we all rolled over our funds. Then, the CEO threw another fit. Seems so many of us had withdrawn funds that they fell out of the discount for size of account, and he ended up with a bigger fee than he'd been paying before we all left. Poor baby.

Since this is the typical level of expertise and attention being paid by corporate officers, do you really want your financial well being left in their hands?
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dickenjb
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Re: My Wife's 401k is expensive.

Post by dickenjb »

Probably the best thing you can do as a couple is max your 401(k) at $17,500 and his and hers Roths for another $11,000. Plus her 401(k) to the match if there is one.

Most folks can't sock away more than that, but if you can, I would go for TSM/TISM in taxable.
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BL
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Re: My Wife's 401k is expensive.

Post by BL »

Can you max your 2 IRAs, your work plan, and just enough for a match (if there is one) at hers? Do either of you have an HSA, or deductible plans for kids college funds? If you still have extra funds (maybe after putting extra into mortgage or saving to pay cash for cars, etc., taxable funds like Vanguard's Total Stock and Total International are quite tax-efficient. Perhaps she needs to keep her resume at the ready in case a better job shows up or she starts looking for one with a decent 401k.

Frankly, she may not have enough clout to change things and may risk her job if she is not very careful.

They tend to get rid of the funds that don't look good so comparing one after-the-fact doesn't really mean anything. I could go back and pick a great performing fund from the past, but knowing which one will do well in the future is not really possible. You can only control costs, AA, holding on, etc.
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roymeo
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Re: My Wife's 401k is expensive.

Post by roymeo »

Your wife's 401(k) is more expensive than some, less expensive than others.

When I was working as a contracted employee for a major company, the contracting company had a 401(k) after you'd worked 6 months. I guess they had enough people that might work short stretches that they didn't want everyone to jump in on a 3 month contract and add a lot of overhead. I don't recall if there was a match. I do recall that they were 5.75% back-end load funds and the fees were around 'industry standard'.

Eventually the company was able to switch over to a better provider, which meant triggering all those back-end loads (a great way to try to lock in your clients). Luckily for the participants, our company covered the load and our accounts weren't reduced in the switch. Of course everyone who left the company and the plan before that point had already gotten taken.

The next plan was better, but not as good as some others I worked for. But since I'm working in an industry with lots of job changing, I've never had to worry about any of those plans for very long.

Hopefully you and your spouse have good communication and she isn't feeling like you're on a crusade that is causing problems for her in her workplace.
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denovo
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Re: My Wife's 401k is expensive.

Post by denovo »

No point arguing with the adviser. Ask the boss/401k administrator in a delicate manner to provide other options or move to a different provider.
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Johm221122
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Re: My Wife's 401k is expensive.

Post by Johm221122 »

Is there a stable value fund? Maybe you could use that for the largest part, I use a S&P index at. 8 and a stable value fund.


John
Topic Author
SpicyUnagi
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Re: My Wife's 401k is expensive.

Post by SpicyUnagi »

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dickenjb
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Re: My Wife's 401k is expensive.

Post by dickenjb »

What about livesoft's strategy of taking out the maximum loan she can apply for and reinvest in taxable?

How is she losing her match in fees? If they match 50 cents on the dollar it would take years and years of 1.5% fees to take her match.

Is one of the Federated options a GIC? What does it pay?
HurdyGurdy
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Re: My Wife's 401k is expensive.

Post by HurdyGurdy »

Lousy 401k plan.

Among her options, is there anything that looks like a http://www.bogleheads.org/wiki/Stable_Value_Fund ?
Topic Author
SpicyUnagi
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Re: My Wife's 401k is expensive.

Post by SpicyUnagi »

There isn't anything that looks like a Stable Value Fund.

I am making a guess that on top of the fund expenses, this advisor is getting paid anywhere between 1-1.5% for his "management". I am also going to guess Ameriprise takes a cut too somewhere.

So were already at 2.5%-3.1%, plus a possible take from Ameriprise directly. She gets a 100% match on the first 4% of her savings.

Do you have a link to livesoft's strategy?

The Federated options are money market accounts that just burn cash.
Last edited by SpicyUnagi on Tue Aug 26, 2014 9:56 pm, edited 1 time in total.
dickenjb
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Re: My Wife's 401k is expensive.

Post by dickenjb »

SpicyUnagi wrote:She gets a 100% match on the first 4% of her savings. I have her contribute 5% for the time being.
You have nothing to complain about, have her drop her contribution to 4%. Fees or no fees, she is making out like a bandit with 100% match.
Easy Rhino
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Re: My Wife's 401k is expensive.

Post by Easy Rhino »

To reiterate what others have said:

- I don't think Ameriprise offers anything that's low-cost.
- The advisor is not a fiduciary, the employer is the fiduciary
- Arguing with the advisor won't get you anywhere. Even if you 'win', nothing changes
- Your wife could make rational argument to the boss on how switching to a different provider could save everyone (including him) money. Take into account that the investment cost savings would have to outweigh the fact that Ameriprise is probably waiving fees to the corporation itself.
- But don't expect much from making the argument :)
Topic Author
SpicyUnagi
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Re: My Wife's 401k is expensive.

Post by SpicyUnagi »

dickenjb wrote:
SpicyUnagi wrote:She gets a 100% match on the first 4% of her savings. I have her contribute 5% for the time being.
You have nothing to complain about, have her drop her contribution to 4%. Fees or no fees, she is making out like a bandit with 100% match.
Would you change the funds I have her in? The advisor can't stop talking about those PIMCO funds...
investor1
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Re: My Wife's 401k is expensive.

Post by investor1 »

Have her contribute 4% to get the match.
Max out your 401(k) while living off of a higher percentage of her paycheck.
Contribute to his and her Roth IRAs.

That gives you $28.5k worth of tax advantaged space for retirement savings + whatever 4% of her salary + her match + your match. Do you still have income that you want to save for retirement?

Beyond that, I think you are better off researching cheaper plans and presenting that information to the employer to try to convince them to shop around for a better plan. Keep in mind there are employer side costs to a 401(k) they will be interested in as well as the logistics of changing plans. They'll also likely be interested in how it affects the plan for highly compensated employees.
Last edited by investor1 on Tue Aug 26, 2014 11:38 am, edited 2 times in total.
investor1
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Re: My Wife's 401k is expensive.

Post by investor1 »

As for what to do with the money in her 401(k), they are all crappy choices. You'll need to pick the best evil and go with it (or change plans/employers). I'd pick an asset class to hold in her account and achieve your desired AA across your portfolio rather than holding multiple funds in her 401(k) to try to meet an AA in each account.

For example, maybe you want to hold some cash in your portfolio. Buy ACMXX and use her 401(k) to hold cash while buying stocks and bonds in the other accounts the two of you have.
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SpicyUnagi
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Re: My Wife's 401k is expensive.

Post by SpicyUnagi »

investor1 wrote:Have her contribute 4% to get the match.
Max out your 401(k) while living off of a higher percentage of her paycheck.
Contribute to his and her Roth IRAs.

That gives you $28.5k worth of tax advantaged space for retirement savings + whatever 4% of her salary + her match + your match. Do you still have income that you want to save for retirement?

Beyond that, I think you are better off researching cheaper plans and presenting that information to the employer to try to convince them to shop around for a better plan. Keep in mind there are employer side costs to a 401(k) they will be interested in as well as the logistics of changing plans. They'll also likely be interested in how it affects the plan for highly compensated employees.
Annually we are able to put away $15,000-$20,000 together between all of the accounts. We can't quite max them out yet.
dickenjb
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Re: My Wife's 401k is expensive.

Post by dickenjb »

SpicyUnagi wrote:Annually we are able to put away $15,000-$20,000 together between all of the accounts. We can't quite max them out yet.
I keep coming back to "what problem are you trying to solve?"

Put 4% into her plan to get the immediate 100% return on investment. Then fund your 401(k) to the match, then his & her Roths, then your 401(k) to the $20K you are comfortable saving.
investor1
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Re: My Wife's 401k is expensive.

Post by investor1 »

SpicyUnagi wrote:
investor1 wrote:Have her contribute 4% to get the match.
Max out your 401(k) while living off of a higher percentage of her paycheck.
Contribute to his and her Roth IRAs.

That gives you $28.5k worth of tax advantaged space for retirement savings + whatever 4% of her salary + her match + your match. Do you still have income that you want to save for retirement?

Beyond that, I think you are better off researching cheaper plans and presenting that information to the employer to try to convince them to shop around for a better plan. Keep in mind there are employer side costs to a 401(k) they will be interested in as well as the logistics of changing plans. They'll also likely be interested in how it affects the plan for highly compensated employees.
Annually we are able to put away $15,000-$20,000 together between all of the accounts. We can't quite max them out yet.
It is a crappy deal, so I understand your concern. However at this point in your life, it is all but a non-issue. I'd minimize the issue by utilizing the structure outlined above, then don't worry about it. By the time you two are able to max out your other tax advantaged space and make this a bigger issue, your life might be very different. Maybe she has a new job with a new plan by then.

My vote is to spend the time that you were willing to put into this to do something a lot more fun :)
HurdyGurdy
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Re: My Wife's 401k is expensive.

Post by HurdyGurdy »

Perhaps that MFS international Value Fund, for the little money she will put there to get the match.
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