How do deal with high expense fees in 401k

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bme616
Posts: 10
Joined: Wed Dec 28, 2016 12:29 am

How do deal with high expense fees in 401k

Postby bme616 » Mon Mar 20, 2017 2:09 am

Hello,

I received excellent and prompt advice with my previous enquiry for myself so I hoped I may be able to ask on behalf of my gf as well.

She has been contributing to her work 401k since it began being offered in 2015. She contributes enough for a match (she contributes 5% and is matched 50% of that so the company contributes 2.5% of her salary). Unfortunately, past the free money of the match, there is little to celebrate since the expenses are quite high. and are as follows...

American Funds AMCAP Fund (R3) 1.03%
Delaware Emerging Markets Fund (A) 1.71%
Delaware Value Fund (A) 1.02%
MFS International Value Fund (A) 1.07%
Oppenheimer International Growth Fund (A) 1.15%
Oppenheimer Main Street Fund (A) 0.94%
Oppenheimer Main Street Value Fund (A) 1.11%
Pioneer Bond Fund (A) 0.85%
Pioneer Strategic Income Fund (A) 1.02%

These all came from a leaflet she was given which explained the plan. I do not know who administers it so I do not know if she has a Brokerage Link or similar option as Fidelity NetBenefits offers. I am not sure what she has it invested in at the moment because she never selected anything and she does not know what the default is other than a vague "conservative allocation" which she got from the leaflet information. She is asking her HR what the website is for managing this and we should know more in a few days after she hears back.

I did get her to open a Vanguard Roth IRA though and got her started in the Target Retirement 2050 fund as a "set it and forget it" fund and it had a low initial investment amount.

Unfortunately I do not have any dollar amounts to add to this for her because I do not know them other than the Vanguard one which she opened with $1,000 and plans to max out this year with $5,500. She does not seem to be the one to want to pay attention to this and rebalance or DIY so this is why I suggested the target retirement for her.

Outside of this I know she has $12,000 saved up in non retirement online savings account and I do not know her tax bracket.

Thank you so much for all of your help in advance!

goingup
Posts: 2262
Joined: Tue Jan 26, 2010 1:02 pm

Re: How do deal with high expense fees in 401k

Postby goingup » Mon Mar 20, 2017 9:51 am

That's terrific that she will fully contribute to her Roth this year. A Target fund is a great choice for any investor, especially a set-and-forget investor.

The 401K options aren't ideal, but we have certainly seen worse posted here. I'd encourage her to shoot for saving 15-20% of gross income between both the 401K and Roth.

CyclingDuo
Posts: 335
Joined: Fri Jan 06, 2017 9:07 am

Re: How do deal with high expense fees in 401k

Postby CyclingDuo » Mon Mar 20, 2017 10:02 am

bme616 wrote:Hello,

I received excellent and prompt advice with my previous enquiry for myself so I hoped I may be able to ask on behalf of my gf as well.

She has been contributing to her work 401k since it began being offered in 2015. She contributes enough for a match (she contributes 5% and is matched 50% of that so the company contributes 2.5% of her salary). Unfortunately, past the free money of the match, there is little to celebrate since the expenses are quite high. and are as follows...


That employer match makes it worth it - in spite of no lower ER fee funds available. As said above - there are worse (higher fund Fees with loads as well).

Is her company a small company? Can she - and other employees - lobby for better fund plan options in the future?

smitcat
Posts: 224
Joined: Mon Nov 07, 2016 10:51 am

Re: How do deal with high expense fees in 401k

Postby smitcat » Mon Mar 20, 2017 10:10 am

"She has been contributing to her work 401k since it began being offered in 2015. She contributes enough for a match (she contributes 5% and is matched 50% of that so the company contributes 2.5% of her salary)."
"I do not know who administers it so I do not know if she has a Brokerage Link or similar option as Fidelity NetBenefits offers."

If she is already on the plan you can likely look at a quarterly report you received or go online with her access to see the plan sponsor.
Once you are on the website and/or have the plans sponsors name many of your other questions should be answered there on the plan website.

User avatar
Duckie
Posts: 4682
Joined: Thu Mar 08, 2007 2:55 pm

Re: How do deal with high expense fees in 401k

Postby Duckie » Mon Mar 20, 2017 4:19 pm

bme616 wrote:She has been contributing to her work 401k since it began being offered in 2015. She contributes enough for a match (she contributes 5% and is matched 50% of that so the company contributes 2.5% of her salary). Unfortunately, past the free money of the match, there is little to celebrate since the expenses are quite high. and are as follows...

Given the listed choices and expenses I recommend she use just (MSIGX) Oppenheimer Main Street Fund Class A (0.94%).

I did get her to open a Vanguard Roth IRA though and got her started in the Target Retirement 2050 fund as a "set it and forget it" fund and it had a low initial investment amount.

If she puts just MSIGX in her 401k she'll need to use her Roth IRA for international and bonds. Or she could choose a TR fund with more bonds than the TR2050 fund to balance out the US stocks in the 401k, such as TR2020.

shanghaista
Posts: 34
Joined: Sun Mar 19, 2017 8:50 am

Re: How do deal with high expense fees in 401k

Postby shanghaista » Mon Mar 20, 2017 6:47 pm

bme616 wrote:I did get her to open a Vanguard Roth IRA though and got her started in the Target Retirement 2050 fund as a "set it and forget it" fund and it had a low initial investment amount.

Unfortunately I do not have any dollar amounts to add to this for her because I do not know them other than the Vanguard one which she opened with $1,000 and plans to max out this year with $5,500. She does not seem to be the one to want to pay attention to this and rebalance or DIY so this is why I suggested the target retirement for her.

Outside of this I know she has $12,000 saved up in non retirement online savings account and I do not know her tax bracket.


Don't forget she can invest $5,500 for 2016 Roth by April 15th. So she can invest $11k of her non-retirement balances (2016 and 2017) immediately and shield herself from any tax on gains.

bme616
Posts: 10
Joined: Wed Dec 28, 2016 12:29 am

Re: How do deal with high expense fees in 401k

Postby bme616 » Wed Apr 12, 2017 11:26 am

I am sorry this took so long but she had to find out how to actually sign in to this and the HR people were not exactly helpful. It seems the 401k is almost an after thought that they don't want people to know about. According to her, the company is extremely cheap so we may need to just deal with it. However, after the reviews this month she will enquire about better options (I suggested she ask for Vanguard index or target funds if possible)

We found out more about the plan. Since she never selected a plan she was automatically put in the following:

Putnam Stable Value Fund 75

So far she has earned 0.32% since 1 January of this year which is not great of course...
Since 1 January of 2016, she has earned 1.55%

Needless to say we can do much better.

The administrator is Ascensus for recordkeeping and Merril Lynch for investment services.

They also now have a Roth option which I suggested she go for with future contributions.

It is also worth mentioning that she may be moving jobs within the next year, should she diversity into other funds now or should she wait until she knows if she is moving jobs or not and then decide?

Also, since we will be getting married within the next year or so, would it be better to make allocations across all of our accounts as if we were one person or is it better to make allocations across our accounts separately as we are doing now? This would of course happen after we get married not before.

mhalley
Posts: 4220
Joined: Tue Nov 20, 2007 6:02 am

Re: How do deal with high expense fees in 401k

Postby mhalley » Wed Apr 12, 2017 12:51 pm

I would probably wait until you got married before setting up a global asset allocation between the two of you. The sooner money is invested, the sooner it has a chance to grow. Who knows what will happen within a year, but you are investing for 30-40 years from now.


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