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Husband's job finally has a 401k offering with unusual funds

Posted: Sun Jul 01, 2018 9:01 pm
by jenig0013
Hi all - hoping for a little help with husband's 401k. His employer started offering one for the first time this year. The funds are listed below - anyone have any recommendations? Simpler is better but we like both the all-in-one type approach as well as the 3-fund or 4-fund approach . . . thanks for any insight. I have a 401k with my work that's entirely in the Vanguard Target Date Funds (about $200k), we just did a backdoor Roth conversion (so only $5500, haven't settled on a fund), and have $28k in a taxable account (FFNOX). Thank you - I've learned so much from you all.

Invesco Stable Asset Fund
Lord Abbett Short Duration Income Fund - Class R3
Eaton Vance Government Opportunities Fund - Class R
JPMorgan Government Bond Fund - Class R2
PGIM Total Return Bond Fund - Class R
Lord Abbett Bond Debenture Fund - Class R3
Lord Abbett High Yield Fund - Class R3
Nuveen Inflation Protected Securities Fund - Class R3
Oppenheimer International Bond Fund - Class R
American Funds 2010 Target Date Retirement Fund - Class R2E
American Funds 2015 Target Date Retirement Fund - Class R2E
American Funds 2020 Target Date Retirement Fund - Class R2E
American Funds 2025 Target Date Retirement Fund - Class R2E
American Funds 2030 Target Date Retirement Fund - Class R2E
American Funds 2035 Target Date Retirement Fund - Class R2E
American Funds 2040 Target Date Retirement Fund - Class R2E
American Funds 2050 Target Date Retirement Fund - Class R2E
American Funds 2055 Target Date Retirement Fund - Class R2E
American Funds 2060 Target Date Retirement Fund - Class R2E
American Funds American Balanced Fund - Class R2E
Columbia Balanced Fund - Class R
ClearBridge Large Cap Value Fund - Class R
American Funds Fundamental Investors Fund - Class R2E
JPMorgan U.S. Equity Fund - Class R2
Nationwide S&P 500 Index Fund - Class R
American Funds The Growth Fund of America - Class R2E
JPMorgan Intrepid Growth Fund - Class R2
Putnam Sustaintable Future Fund - Class R
Wells Fargo Special Mid Cap Value Fund - Class R
JPMorgan Mid Cap Value Fund - Class R2
Nationwide Mid Cap Market Index Fund - Class R
Eaton Vance Atlanta Capital SMID Cap Fund - Class R
Nuveen Small Cap Value Fund - Class R3
Wells Fargo Special Small Cap Value Fund - Class R
JPMorgan US Small Company Fund - Class R2
Nationwide Small Cap Index Fund - Class R
Columbia Overseas Value Fund - Class R
Oppenheimer International Equity Fund - Class R
Franklin International Growth Fund - Class R
American Funds New Perspective Fund - Class R2E
Wells Fargo Emerging Markets Equity Income Fund - Class R
BlackRock Health Sciences Opportunities Portfolio - Class R
Columbia Global Energy and Natural Resources Fund - Class R
American Century Global Gold Fund - Class R
Deutsche Real Estate Securities Fund - Class R
Invesco Global Real Estate Fund - Class R
Putnam Global Technology Fund - Class R

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Sun Jul 01, 2018 9:39 pm
by Tyler Aspect
These 401k selections all have high expense ratios! The least expensive one is Nationwide S&P 500 fund.

To compensate for your husband's all stock 401k selection maybe you can dial down your target retirement fund's date to 2030. That would be my suggestion. What is your husband's age by the way?

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Sun Jul 01, 2018 9:44 pm
by Lafder
Go back and edit to add the expense ratios (ERs) for his offerings. That will really help eliminate some :)
lafder

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Sun Jul 01, 2018 9:50 pm
by delamer
Tyler Aspect wrote:
Sun Jul 01, 2018 9:39 pm
These 401k selections all have high expense ratios! The least expensive one is Nationwide S&P 500 fund.

To compensate for your husband's all stock 401k selection maybe you can dial down your target retirement fund's date to 2030. That would be my suggestion. What is your husband's age by the way?

If the S&P500 fund is the least expensive option in your husband’s 401(k), then invest in that.

Determine your preferred asset allocation across all retirement accounts, and figure out how to revise your selections in your 401(k) and the Roth to get to that overall allocation.

At this point you won’t need to do much, because there will be so little money in your husband’s account. But have a plan for the point when you’ll need to make adjustments.

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Sun Jul 01, 2018 9:57 pm
by grok87
Tyler Aspect wrote:
Sun Jul 01, 2018 9:39 pm
These 401k selections all have high expense ratios! The least expensive one is Nationwide S&P 500 fund.

To compensate for your husband's all stock 401k selection maybe you can dial down your target retirement fund's date to 2030. That would be my suggestion. What is your husband's age by the way?
Agree. In the husbands plan the S&p 500 seems like the best option with an expense ratio of 0.77%.so I would put all his money in that and adjust elsewhere to get back to whatever overall stock/bond mix you want jointly between you.

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Sun Jul 01, 2018 10:19 pm
by jbranx
The Nationwide 500 index is also the only one I would do. I checked the Nationwide Midcap 400 R one as well, and it's 97 bp. The Nationwide Small CapR tracks the Russell 2000 and charges 94 bp. You seem to have better options elsewhere to round out a good total market fund/Three Fund Portfolio, but if not, you could do the US total market here I guess. All in, while expensive, it's less than most folks pay for an adviser or for an active fund. Is there a company matching contribution? A brokerage option?

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Sun Jul 01, 2018 10:27 pm
by jalbert
The OP has not yet provided expense ratios. They may well differ from what is provided at the fund provider site.

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Sun Jul 01, 2018 11:06 pm
by jenig0013
Well Jalbert answered one questions for me - I was just going to look at each fund's site to determine ER. Will look into his 401k paperwork to see what the ERs are and will post them.

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Sun Jul 01, 2018 11:49 pm
by jenig0013
nvesco Stable Asset Fund 1.08%
Lord Abbett Short Duration Income Fund - Class R3 0.89%
Eaton Vance Government Opportunities Fund - Class R 1.38%
JPMorgan Government Bond Fund - Class R2 1.1%
PGIM Total Return Bond Fund - Class R 1.01%
Lord Abbett Bond Debenture Fund - Class R3 1.1%
Lord Abbett High Yield Fund - Class R3 1.19%
Nuveen Inflation Protected Securities Fund - Class R3 1.03%
Oppenheimer International Bond Fund - Class R 1.25%
American Funds 2010 Target Date Retirement Fund - Class R2E 1.13%
American Funds 2015 Target Date Retirement Fund - Class R2E 1.12%
American Funds 2020 Target Date Retirement Fund - Class R2E 1.14%
American Funds 2025 Target Date Retirement Fund - Class R2E 1.16%
American Funds 2030 Target Date Retirement Fund - Class R2E 1.18%
American Funds 2035 Target Date Retirement Fund - Class R2E 1.19%
American Funds 2040 Target Date Retirement Fund - Class R2E 1.2%
American Funds 2045 Target Date Retirement Fund - Class R2E 1.2%
American Funds 2050 Target Date Retirement Fund - Class R2E 1.2%
American Funds 2055 Target Date Retirement Fund - Class R2E 1.21
American Funds 2060 Target Date Retirement Fund - Class R2E 1.26%
American Funds American Balanced Fund - Class R2E 1.07%
Columbia Balanced Fund - Class R 1.21%
ClearBridge Large Cap Value Fund - Class R 1.2%
American Funds Fundamental Investors Fund - Class R2E
1.09%
JPMorgan U.S. Equity Fund - Class R2 1.19%
Nationwide S&P 500 Index Fund - Class R 0.77%
American Funds The Growth Fund of America - Class R2E 1.12%
JPMorgan Intrepid Growth Fund - Class R2 1.09%
Putnam Sustaintable Future Fund - Class R 1.33%
Wells Fargo Special Mid Cap Value Fund - Class R 1.43%
JPMorgan US Small Company Fund - Class R2 1.5
Nationwide Small Cap Index Fund - Class R 0.96%
Columbia Overseas Value Fund - Class R 1.54%
Oppenheimer International Equity Fund - Class R 1.49%
Franklin International Growth Fund - Class R 1.37%
American Funds New Perspective Fund - Class R2E 1.24%
Wells Fargo Emerging Markets Equity Income Fund - Class R 1.88%
BlackRock Health Sciences Opportunities Portfolio - Class R1.49%
Columbia Global Energy and Natural Resources Fund - Class R 1.6%
American Century Global Gold Fund - Class R 1.17%
Deutsche Real Estate Securities Fund - Class R 1.31%
Invesco Global Real Estate Fund - Class R 1.61%
Putnam Global Technology Fund - Class R 1.53%

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Sun Jul 01, 2018 11:55 pm
by jenig0013
Forgot a few mid caps:

JPMorgan Mid Cap Value Fund - Class R2 1.5%
Nationwide Mid Cap Market Index Fund .96%
Eaton Vance Atlanta Capital SMID Cap Fund 1.44%
Nuveen Small Cap Value Fund - Class R3 1.45%
Wells Fargo Special Small Cap Value Fund - Class R 1.58%

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Sun Jul 01, 2018 11:55 pm
by jenig0013
Husband is 37, I’m 34.

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 12:19 am
by rgs92
It's actually not an unusual set of fund choices at all. Many smaller companies and contracting houses offer only higher-expense-ratio funds because it costs them less to use (or they get rebates from) the financial firm.

I worked for companies that had these choices without a low-cost index fund to be found anywhere.
It's very common.

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 1:01 am
by jbranx
On a long-term basis, those are killer fee levels, no matter which way the markets go. I would only look at the three index fund choices from Nationwide, preferring probably the 500 index, unless you need the mid or small index to fill a need you can't find elsewhere. If there is a company match, for sure go for it. It's also helpful to remember you are only deferring taxes, not eliminating them; however, you are both young and do have the right to transfer the 401k if your husband changes jobs. I would do some calculating based on your overall financial/investing situation before loading up this 401k to the max for sure.

The previous poster is correct that this fund offering is not that unusual. I see the same and worse all the time from friends and family who work for small firms and nonprofits. The only very slight "improvement" in this offering is that American Funds are represented, which isn't the worst of the list above, but they are not index killers by any great margin, if at all. Maybe some consolation that your friends who use a broker will pay a hefty load to get into those funds! Again, the 500 fund is the best of the lot given the lower expense and the fact that it at least eliminates "manager risk."

Good luck, and congratulations for discovering at a young age that indexing, low costs, and saving, saving are the best paths to wealth.

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 5:22 am
by TwstdSista
I would put 100% of his contributions into: Nationwide S&P 500 Index Fund - Class R 0.77%, then make sure you hold your bonds and international allocations in other accounts (your 401k and traditional IRAs and are perfect for both, and that Roth account is perfect for international).

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 5:30 am
by JustinR
I'd do "Nationwide S&P 500 Index Fund - Class R 0.77%" since it's the cheapest. Easy choice.

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 5:45 am
by oldcomputerguy
Does the plan do a company match?

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 8:15 am
by jenig0013
No match :( he works for a nonprofit and I was happy to see that we had a 401k at all this year. So, recognizing these funds have pretty high ERs, would you recommend NOT maxing it out? I currently max out my 401k, we did the small backdoor Roth for me (he has too many rollover IRAs to make it worthwhile), and the taxable account. We were putting money in the taxable account until we had his 401k as an option.

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 9:02 am
by Elbowman
jenig0013 wrote:
Mon Jul 02, 2018 8:15 am
So, recognizing these funds have pretty high ERs, would you recommend NOT maxing it out?
While it is not ideal, from what I've read it needs to be really bad (2%+) before it's no longer worth the tax break. Just prioritize it last when it comes to to your tax advantaged accounts.

If you want to dig deeper into this question, the relevant info is your marginal tax rate (the higher it is, the better the 401k) and how long your husband plans to stay at that job (the lower it is, the better the 401k, since he can roll it into a low price IRA after he leaves).

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 10:05 am
by megabad
Elbowman wrote:
Mon Jul 02, 2018 9:02 am
jenig0013 wrote:
Mon Jul 02, 2018 8:15 am
So, recognizing these funds have pretty high ERs, would you recommend NOT maxing it out?
While it is not ideal, from what I've read it needs to be really bad (2%+) before it's no longer worth the tax break. Just prioritize it last when it comes to to your tax advantaged accounts.

If you want to dig deeper into this question, the relevant info is your marginal tax rate (the higher it is, the better the 401k) and how long your husband plans to stay at that job (the lower it is, the better the 401k, since he can roll it into a low price IRA after he leaves).
Agree with this. You are likely in 24%+ bracket, so I would personally still prefer 401k (Nationwide SP500) over taxable. In other words, hypothetically, I would max HSA, max your 401k, max 2x backdoor roth, and maybe then work to fill up his 401k, and then money left over in taxable.

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 10:21 am
by Stinky
JustinR wrote:
Mon Jul 02, 2018 5:30 am
I'd do "Nationwide S&P 500 Index Fund - Class R 0.77%" since it's the cheapest. Easy choice.
I agree. Take the lowest ratio, to the extent that you put any money into this plan.

I'm a trustee of my company's 401(k) plan. Our Retirement Committee takes fee levels very seriously, and the fee levels you quote just leave me floored. Our plan is heavy in index funds, and I don't know that any of our funds have even a 0.77% expense ratio. No person who follows Bogle philosophy could be happy with these fees.

I'm sorry that the trustees of your husband's plan aren't more protective of the employee 401(k) money. Without a company match, I would definitely rank this the very bottom of your family's tax deferred savings options. Max out your 401(k) and both your IRAs before you go into this 401(k).

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 11:09 am
by emlowe
There is a section on the wiki about expensive 401k plans: https://www.bogleheads.org/wiki/401(k)# ... re_choices

There is also an excellent article on how to campaign for better choices: https://www.bogleheads.org/wiki/How_to_ ... 01(k)_plan

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 12:45 pm
by Mors
I am not impressed with the high fee index funds that are available. With these fees, I woudl rather go with the cheaper actively managed funds that their managers have a proven track record and do not take excessive risk.I would invest in:

Fixed income

Invesco Stable Asset Fund 1.08%

PGIM Total Return Bond Fund - Class R 1.01%

Balanced, mainly US stocks and bonds

American Funds American Balanced Fund - Class R2E 1.07%

US stocks

American Funds Fundamental Investors Fund - Class R2E 1.09%

International stocks

American Funds New Perspective Fund - Class R2E 1.24%

Work the percentages in order to have the stock/bonds and domestic/international allocation of your liking. Bear in mind that PGIM takes more risk than the a US aggregate bond index fund, this is why I also added the stable value fund.

I would be hesitant to cut down funds, not only because you may have to exclude asset classes, but also because with less actively managed funds you will increase manager risk.

An example allocation for 75/25 stocks/bonds and about 60/40 US/Int could be

10% Stable Value
10% PGIM
10% American Funds American Balanced Fund
40% American Funds Fundamental Investors Fund
30% American Funds New Perspective Fund

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 12:58 pm
by jalbert
jenig0013 wrote:
Mon Jul 02, 2018 8:15 am
No match :( he works for a nonprofit and I was happy to see that we had a 401k at all this year. So, recognizing these funds have pretty high ERs, would you recommend NOT maxing it out? I currently max out my 401k, we did the small backdoor Roth for me (he has too many rollover IRAs to make it worthwhile), and the taxable account. We were putting money in the taxable account until we had his 401k as an option.
If you are making enough that a Roth IRA contribution is not possible, the tax benefits of the 401K exceed the downside of the high ER of the S&P 500 fund. Might as well start with that while building up an account balance.

You might investigate the crediting interest rate of the invesco stable value fund. That might be a reasonable fixed-income option.

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 1:26 pm
by pkcrafter
No match :( he works for a nonprofit
A nonprofit? Someone is making a big profit off the cost of those funds! Maybe the 401k provider is giving the appearance of a good deal by offering a rebate or some incentive, but it's still a bad plan. But yes, he should use it and opt for the S&P500, even at a cost 10X higher than available elsewhere.

Paul

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 1:34 pm
by ralph124cf
As a heads up, the Lord Abbot funds normally have a 2% front load fee, plus a 12(b)1 fee.

I would not be at all surprised if someone responsible for setting this up was either an idiot or on the take from the fund salesman.

Ralph

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 1:52 pm
by jalbert
If an employer has 100 or fewer employees, a SIMPLE IRA would likely deliver more value to its employees than a high fee 401K.

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 2:10 pm
by Mors
jenig0013 wrote:
Mon Jul 02, 2018 8:15 am
No match :( he works for a nonprofit and I was happy to see that we had a 401k at all this year. So, recognizing these funds have pretty high ERs, would you recommend NOT maxing it out? I currently max out my 401k, we did the small backdoor Roth for me (he has too many rollover IRAs to make it worthwhile), and the taxable account. We were putting money in the taxable account until we had his 401k as an option.
Still max it out, but only after your IRAs.

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 2:11 pm
by pkcrafter
ralph124cf wrote:
Mon Jul 02, 2018 1:34 pm
As a heads up, the Lord Abbot funds normally have a 2% front load fee, plus a 12(b)1 fee.

I would not be at all surprised if someone responsible for setting this up was either an idiot or on the take from the fund salesman.

Ralph
Yep. :shock: ........ :confused

The Lord Abbot Debenture fund has a front load. The high-yield fund has a 0.5% 12b-1.


Paul

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 2:16 pm
by C4NT
JustinR wrote:
Mon Jul 02, 2018 5:30 am
I'd do "Nationwide S&P 500 Index Fund - Class R 0.77%" since it's the cheapest. Easy choice.
That is what I would do as well, only after maxing out your IRAs. If you want bonds or international in your asset allocation, you can put them in a traditional IRA or Roth IRA.

Re: Husband's job finally has a 401k offering with unusual funds

Posted: Mon Jul 02, 2018 2:28 pm
by cjcerny
If there is no match, I would only contribute to this 401k if he maxes out a IRA or Roth IRA at Vanguard first.