help with expense ratio

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r21emember
Posts: 1
Joined: Wed Jun 13, 2018 5:23 pm

help with expense ratio

Post by r21emember » Wed Jun 13, 2018 5:53 pm

hello everyone,

I have a ROTH-IRA with fidelity-FFFFX-FIDELITY FREEDOM 2040 with expense ratio of 0.75%--over 11k
I also have a 403b also with fidelity-FFFGX FID FREEDOM 2045, expense ratio of 0.75%--over 37k

Should I switch the boths to index funds and bonds-FSTVX and FSITX with expense 0.035 and 0.045? if possible
Any pro and cons to this plan?
Am in high fed income tax bracket and high state income tax
Am a new investor so I greatly appreciate your thoughtful response and suggestions.

dbr
Posts: 26915
Joined: Sun Mar 04, 2007 9:50 am

Re: help with expense ratio

Post by dbr » Wed Jun 13, 2018 6:19 pm

You should not spend 0.7% extra for a target retirement fund, or for any fund for that matter.

I didn't realize their costs are that high.

MotoTrojan
Posts: 1598
Joined: Wed Feb 01, 2017 8:39 pm

Re: help with expense ratio

Post by MotoTrojan » Wed Jun 13, 2018 6:22 pm

r21emember wrote:
Wed Jun 13, 2018 5:53 pm
hello everyone,

I have a ROTH-IRA with fidelity-FFFFX-FIDELITY FREEDOM 2040 with expense ratio of 0.75%--over 11k
I also have a 403b also with fidelity-FFFGX FID FREEDOM 2045, expense ratio of 0.75%--over 37k

Should I switch the boths to index funds and bonds-FSTVX and FSITX with expense 0.035 and 0.045? if possible
Any pro and cons to this plan?
Am in high fed income tax bracket and high state income tax
Am a new investor so I greatly appreciate your thoughtful response and suggestions.
Tax bracket won't matter at all for the Roth, and will only matter when you ultimately withdraw (receive cash) from the 403b.

You should absolutely come up with your own AA and manage it yourself if that savings in ER are that extreme. I'd start with a 3-fund portfolio of Total US Stock Market (or S&P500), Total International (or similar), and Total Bond, but there is tons of info on that.

Most would keep the Roth all in equities and bonds ideally in the 403b.

emlowe
Posts: 33
Joined: Fri Jun 01, 2018 2:57 pm

Re: help with expense ratio

Post by emlowe » Wed Jun 13, 2018 6:30 pm

Fidelity has this unfortunate setup where they offer both Managed and Index Target Date Funds eg:

FBIFX Fidelity Freedom® Index 2040 Fund Investor: ER 0.15
vs
FFFFX Fidelity Freedom 2040: ER: 0.75

and

FIOFX Fidelity Freedom Index 2045 Investor: ER 0.15
vs
FFFGX Fidelity Freedom 2045: ER 0.75

They make one very easy to find - guess which

-Earle

dbr
Posts: 26915
Joined: Sun Mar 04, 2007 9:50 am

Re: help with expense ratio

Post by dbr » Wed Jun 13, 2018 6:31 pm

So that is the solution. I wondered how that ER could be so high.

mcraepat9
Posts: 877
Joined: Thu Jul 16, 2015 11:46 am

Re: help with expense ratio

Post by mcraepat9 » Wed Jun 13, 2018 6:36 pm

emlowe wrote:
Wed Jun 13, 2018 6:30 pm
Fidelity has this unfortunate setup where they offer both Managed and Index Target Date Funds eg:

FBIFX Fidelity Freedom® Index 2040 Fund Investor: ER 0.15
vs
FFFFX Fidelity Freedom 2040: ER: 0.75

and

FIOFX Fidelity Freedom Index 2045 Investor: ER 0.15
vs
FFFGX Fidelity Freedom 2045: ER 0.75

They make one very easy to find - guess which

-Earle
+1 - switch to the Freedom INDEX fund and move on. Moving to individual funds usually makes sense once you spill over into taxable accounts. If tax advantaged accounts are all you had, use the Freedom INDEX fund and get auto rebalancing for a mere 10-12 bps.
Last edited by mcraepat9 on Wed Jun 13, 2018 6:38 pm, edited 1 time in total.
Amateur investors are not cool-headed logicians.

retiredjg
Posts: 32655
Joined: Thu Jan 10, 2008 12:56 pm

Re: help with expense ratio

Post by retiredjg » Wed Jun 13, 2018 6:37 pm

If you want to use a target fund from Fidelity, I suggest using the Index Target funds. They are both named Fidelity Freedom. One has the addition of Index in the name and one does not.

The difference of .15% and .7% (or thereabouts) will mean something over the years in my opinion.

emlowe
Posts: 33
Joined: Fri Jun 01, 2018 2:57 pm

Re: help with expense ratio

Post by emlowe » Wed Jun 13, 2018 6:41 pm

This fund screen link for Fidelity should show you all the INDEX Freedom Funds:

https://www.fidelity.com/fund-screener/ ... pe&idxFd=Y

-Earle

Nate79
Posts: 2549
Joined: Thu Aug 11, 2016 6:24 pm
Location: Portland, OR

Re: help with expense ratio

Post by Nate79 » Thu Jun 14, 2018 12:20 am

When labeled as index they are passive index funds. Otherwise the examples given are actually active managed funds hence the higher ER.

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