Bogleheads

MR_Rossi · Joined: 15 Nov 2007 Posts: 160

Not sure if this is in the right section or not, but my company is instituting a 401K program through a company that's part of the Schwab network. We're being told that we can either contribute to the 401K, pay a $0.63/$1000 fee every quarter and choose whatever funds they have lined up, or go through a PCRA, pay a one time $75 fee, and then have access to over 2,000 funds in the Schwab network. I started looking at funds listed as options under the PCRA, and sadly there were no Vanguard funds. Aside from Schwab's own funds, can someone that has a Schwab PCRA point me in the right direction of some low ER index funds similar to Vanguard? Also, if you have a PCRA, do you pay any other ongoing fees aside from the one-time $75 account setup? Thanks in advance.

MR

Specialized · Joined: 22 Jul 2007 Posts: 339 Location: Los Angeles

My company has a Schwab PCRA option in its 401k plan. I can purchase anything except company stock through Schwab Brokerage, and put my money in Vanguard and iShares ETF's. Schwab charges $12.95 per trade so I only tranfer money from the regular 401k options to the PCRA once a year. There was no setup fee, but they charge me something like $25 a quarter for the PCRA. Index fund ETF's have very low fees, so I think it's worth it.

curiouskitty · Joined: 18 Oct 2009 Posts: 20

I wanted to point out that Schwab just released a series of super low cost ETFs and there is no commission if you buy and sell them through Schwab. The expense ratios are generally better than the corresponding Vanguard options plus you will save $12.95 on each buy and sell. Between the Schwab index funds and ETFs, it should be easy to put together a Boglehead-ish portfolio. Four of the ETFs started trading today and four more come out next month.

https://investing.schwab.com/s....ymbol=QQQQ

Specialized · Joined: 22 Jul 2007 Posts: 339 Location: Los Angeles

curiouskitty · Joined: 18 Oct 2009 Posts: 20

Here's a good comparison between Schwab's ETFs and their closest Vanguard ETF competitors: http://www.schwab.com/public/s....=etfs&

If you want to track the same index as VTI (.09%), then you should use Schwab's index fund SWTSX (.09%). If you're not picky about it being the exact same index, then you can use the SCHB ETF (.08%) which uses the Broad Market Index instead of the Total Stock Market Index.

Schwab doesn't have one fund that has both developed and emerging international, so you can just mix developed international (SCHF, .15%), developed small-cap international (SCHC, .35%), and emerging markets (SCHE, .35%). With $100 minimums for the index funds and 1 share minimums for the ETFs, it's easy to do whatever Smile

dbr · Joined: 04 Mar 2007 Posts: 4995

I use a Schwab PCRA. Rules for the PCRA are specific to the 401K plan and to Schwab but should not be confused with a Schwab retail brokerage account. In the Megacorp plan the cost is $75/year. Mutual funds only can be purchased (no ETFs, stocks, or bonds). Vanguard mutual funds are available for a transaction fee ($49.95 usually) and there is a list of NTF funds that have no transaction cost.

The terms of this plan are advantageous for investors with significant assets in the 401K who manage to limit the frequency of transactions and keep amounts per transaction large. Paired with a stable value fund in the 401K, Vanguard bond funds in the PCRA allow a good all fixed income allocation in this plan. The 0.15% 401k service fee is not assessed against assets in the PCRA, which offsets the PCRA fee and transaction costs.

MR_Rossi · Joined: 15 Nov 2007 Posts: 160

Wow, thanks for the replies guys. I really appreciate the responses. I'm still waiting for final details of the company plan to come out, but the links you provided will help get me thinking on what investments I should use before the plan rolls out. Thanks!

MR

curiouskitty · Joined: 18 Oct 2009 Posts: 20

mhalley · Joined: 20 Nov 2007 Posts: 367

I have a Schwab PCRA, and it basically works like my Fidelity one did. Can buy any stock, bond, mutual fund for a fee (xs for the NTF funds which are free). The addition of the Scwhab No commission ETFs will be great for us that have this option.
Mike

dbr · Joined: 04 Mar 2007 Posts: 4995

dave.d · Joined: 19 Mar 2007 Posts: 792 Location: Richmond, VA

I don't have a Schwab PCRA but it sounds like you are being offered the full set of funds available to a normal brokerage account at Schwab.

The Schwab ETF's will be a good option, if available, at least if they can be traded without commissions. If you must pay commissions then transactions costs are likely to control your decision, since you will probably want to invest an amount each month. Using ETF's might also require you to enter purchases manually, either during the day when the market is open or overnight using limit orders. I would consider that a royal pain for a monthly 401(k) investment.

Schwab also has conventional open-ended, cap-weighted index funds like Schwab 1000, Schwab Small Cap Index, Schwab International Index, and one or more bond index funds. I don't recall if they have a TIPS fund, but they probably do. The expense ratios on these will be distinctly higher than the corresponding Vanguard funds but your transactions costs to use them should be zero once you have an account with access to them. These could be your best option, depending on the fee structure of your plan.

Finally, Schwab has open-ended funds that use the RAFI fundamental indexes. Fundamental Indexing generates some controversy around here, but I think these funds including Small/Mid U.S. (SFSNX) and Small/Mid International (SFILX) are excellent ways to get a small/value tilt (if desired!) at reasonable cost, with no bid/ask spread, no commissions, and no transaction fees. I would reckon these as an affirmative advantage of being at Schwab.

suzanne0011 · Joined: 18 Nov 2009 Posts: 1

I'm an investment advisor who focuses my company on mananging pcra for individuals. Each pcra is a little differnet from company to company. Some commisions are 8.95, some are 12.95. The ones I work with allow you to invest with mutual funds, stocks, etf's, bonds. The set up fee and yearly fee also vary. If you go to the mutaul fund side of your 401k and look at the expeses of each mutual fund, the expenses often much more than the pcra side. PCRA is a great option if you know what to invest in or hire an investment advisor to manage it for you. It's not difficult to do better than the mutaul fund side of the 401k. Best advantage of pcra is being able to use stops to mange downside risk. Critical right now. If you don't know what to invest in or don't have time, it's proble best to stay with the mutual funds. Your 800 number can answer company specific questions.