401ks, High Fees, Company Matches

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401ks, High Fees, Company Matches

Postby CaliJim » Fri Jul 26, 2013 3:11 pm

WRT: viewtopic.php?f=10&t=120212&newpost=1760335

Do the 'company match' contributions made by employers to 401k plans make up for the generally higher expense ratios (~1.27%) associated with 401k plans?
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Re: 401ks, High Fees, Company Matches

Postby dbr » Fri Jul 26, 2013 3:22 pm

CaliJim wrote:WRT: viewtopic.php?f=10&t=120212&newpost=1760335

Do the 'company match' contributions made by employers to 401k plans make up for the generally higher expense ratios (~1.27%) associated with 401k plans?


Usually yes, in the sense that the investor is better off to pay the costs but get the match. Naturally this is more the case for a young employee with a small balance and small costs. Ability to move out of the plan by not staying in the job also makes taking the match an even better idea most of the time. Certainly not, in the sense that there is still no justification for excessive costs. Employers could just as well offer a low cost plan and the match.
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Re: 401ks, High Fees, Company Matches

Postby MitchC » Fri Jul 26, 2013 3:42 pm

Guess we're fortunate to have 4 good Vanguard funds available to us at 0.10 ER in our 401k plan offerings :D (not meaning to rub it in)
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Re: 401ks, High Fees, Company Matches

Postby CaliJim » Fri Jul 26, 2013 8:41 pm

Thanks for the responses. I converted my 401k in to an IRA a while back so the question is moot for me.

But once upon a time I went to my old company's HR department and asked why we didn't have better funds choices. I was told, in not so many words, "you get a generous company match, so quit bitching".

I dunno, but I sometimes suspected that the same company that manged the 401k was also offering executive wealth management at very low cost to the senior execs. I just didn't understand the resistance to really look into the matter, but there was definitely a smoke screen in place.

I know we have had threads where bogleheads have been successful in getting their plan administrators changed to a low cost administrator... but for those of you who are not in low cost plans... my advice is .... dont' sweat it too much if you are getting a decent company match, and put your efforts into things that you can control, such as savings rate, asset allocation, and staying the course.
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Re: 401ks, High Fees, Company Matches

Postby Jeff7 » Fri Jul 26, 2013 11:49 pm

CaliJim wrote:Thanks for the responses. I converted my 401k in to an IRA a while back so the question is moot for me.

But once upon a time I went to my old company's HR department and asked why we didn't have better funds choices. I was told, in not so many words, "you get a generous company match, so quit [complaining]".
Hmm....that sounds familiar.

I dunno, but I sometimes suspected that the same company that manged the 401k was also offering executive wealth management at very low cost to the senior execs. I just didn't understand the resistance to really look into the matter, but there was definitely a smoke screen in place.

I know we have had threads where bogleheads have been successful in getting their plan administrators changed to a low cost administrator... but for those of you who are not in low cost plans... my advice is .... dont' sweat it too much if you are getting a decent company match, and put your efforts into things that you can control, such as savings rate, asset allocation, and staying the course.
And when you leave your current employer, roll that 401k over into an IRA of low-cost funds of your choosing.
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