FZROX or FSKAX in 401 rollover to Fidelity

[fourwedge]

I'm a long time member here but I set it and forget it.

have most of my retirement and investments in the 3 fund portfolio at Vanguard auto-re balancing annually. I haven't really kept up on the ZERO fund introduction.

I am opening an HSA at Fidelity to transfer a current HSA and am also getting ready to roll over my current 401K (which is several hundred K) in Fidelity Total Stock Market (FSKAX) as I am getting out of the corporate world in the next several weeks. Setting up my new funds I saw the ZERO FZROX funds. What is the thought process behind these funds? It is the lowest prices available (0%) for slightly less diversity? So this is only a retirement funds question. I see the disadvantage to the ZERO funds for tax loss harvesting purposes.

Is the extra diversity worth paying above ZERO %?

What is the general consensus about these funds?

[arcticpineapplecorp.]

this is what I found using the google:

https://www.google.com/search?sitesearc ... zero+funds

lots of opinions. interesting reading.

here's a chart of vtsax vs fskax (for some reason zero funds arent' coming up at morningstar) since inception of fskax which hasn't been around as long as vtsax:

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

you can see vtsax beat fskax, but only by a nose. too similar to make an appreciable difference.

here's a link comparing the three but only from Sept 2018 (when fzrox started) to now so take that for what it's worth:

https://www.portfoliovisualizer.com/bac ... ion3_3=100

can you see much difference between the three? I can't. happy investing!

[fourwedge]

good reads, thanks for the charts as well. Checking it out.

[Vanguard Fan 1367]

I like FSKAX. It has been very good to me.

[lakpr]

I always make it a point to discourage roll over of 401k funds into IRA plans, based on the asset protections. Do not give up those protections easily, without at least giving it some serious thought. If you do decide to still rollover to an IRA, so be it, but at least you will have made an informed decision.

Too often, people feel that when the leave the job, they MUST rollover the 401k funds to an IRA. Not true. If the amount contributed to the plan (usually this amount does NOT include roll overs of other 401k / IRA funds) is at least $5000, the employer cannot kick you out of the plan.

401k funds also have access to the same funds that you get in retail, for much lower expense ratios. For example, I get VIIIX (Vanguard Institutional Index Trust) in my plan for 0.02% ER, whereas the retail equivalent of the same fund, VFIAX (Vanguard 500 index fund) is available at 0.04%. On a balance of $400k that I have in my plan, that's $80 per year cheaper.

There is nothing that is not offered by a 401k plan that is offered by an IRA, tax wise or distribution wise (assuming pre-tax, not Roth).

[ruralavalon]

I'm a long time member here but I set it and forget it.

have most of my retirement and investments in the 3 fund portfolio at Vanguard auto-re balancing annually. I haven't really kept up on the ZERO fund introduction.

I am opening an HSA at Fidelity to transfer a current HSA and am also getting ready to roll over my current 401K (which is several hundred K) in Fidelity Total Stock Market (FSKAX) as I am getting out of the corporate world in the next several weeks. Setting up my new funds I saw the ZERO FZROX funds. What is the thought process behind these funds? It is the lowest prices available (0%) for slightly less diversity? So this is only a retirement funds question. I see the disadvantage to the ZERO funds for tax loss harvesting purposes.

Is the extra diversity worth paying above ZERO %?

What is the general consensus about these funds?

There has been no general consensus. There has been a lot of discussion, but not much actual information because the Fidelity ZERO funds are so new and use proprietary indexes that nobody else uses.

I see no problem with using the Fidelity ZERO funds in tax-advantaged accounts.

[lakpr]

So this is only a retirement funds question. I see the disadvantage to the ZERO funds for tax loss harvesting purposes.

I see, on the other hand, a great advantage of these ZERO funds for tax-loss harvesting purposes. The ZERO funds cannot be claimed to be substantially identical to any other fund on the market, yet they do (based on a little less than 2 years data we have available) seem to track the well established S&P 500 index and International Index funds very closely.

So where possible, invest all the tax-advantaged accounts into these ZERO funds. Then, with the taxable accounts, you can do the tax-loss harvesting to your heart's content with the more established funds. You will not have to rule out a potential tax-loss harvesting partner fund/ETF, just because you also happen to have that same fund in your HSA / Roth IRA / your spouse HSA / your spouse Roth IRA (and of course Zero funds are not available in any 401k plans).

In other words, the zero funds are perfectly suited for tax-advantaged accounts where the concept of "tax loss" does not exist.

[JonnyDVM]

I prefer FZROX because it has no cost but I hold both due to past TLH. You can’t go wrong with either.

[marcopolo]

I always make it a point to discourage roll over of 401k funds into IRA plans, based on the asset protections. Do not give up those protections easily, without at least giving it some serious thought. If you do decide to still rollover to an IRA, so be it, but at least you will have made an informed decision.

Too often, people feel that when the leave the job, they MUST rollover the 401k funds to an IRA. Not true. If the amount contributed to the plan (usually this amount does NOT include roll overs of other 401k / IRA funds) is at least $5000, the employer cannot kick you out of the plan.

401k funds also have access to the same funds that you get in retail, for much lower expense ratios. For example, I get VIIIX (Vanguard Institutional Index Trust) in my plan for 0.02% ER, whereas the retail equivalent of the same fund, VFIAX (Vanguard 500 index fund) is available at 0.04%. On a balance of $400k that I have in my plan, that's $80 per year cheaper.

There is nothing that is not offered by a 401k plan that is offered by an IRA, tax wise or distribution wise (assuming pre-tax, not Roth).

I agree about the asset protection issue. Some states do provide IRA asset protection, but not as strong as federal protection of 401k.

But, you are generalizing (perhaps your experience) about 401k plans costs and fund availability. What you say may be true for your plan, but is not true in general. Many 401k have fees tacked on, it depends on how much of the fees the employer absorbs. Many 401k also have limited selection of funds.

Agree that one should make an informed decision, but it should be based on their own circumstances (what does their 401k offer relative to an IRA), your generalization does not apply in many circumstances.

[lakpr]

But, you are generalizing (perhaps your experience) about 401k plans costs and fund availability. What you say may be true for your plan, but is not true in general. Many 401k have fees tacked on, it depends on how much of the fees the employer absorbs. Many 401k also have limited selection of funds.

Agree that one should make an informed decision, but it should be based on their own circumstances (what does their 401k offer relative to an IRA), your generalization does not apply in many circumstances.

I am not generalizing, all I am saying is that, one must give a serious thought. Apply that thought to own individual circumstances.

Asset protection, when all said and done, is theoretical in nature. It will come into play only when, in the distant future, you MAY fall among hard times and owe money to people. Whereas the fees being incurred in a 401k plan are a real, year-on-year expense.

But then again, what is the going insurance rate for all those trusts etc. designed to keep money away from creditors? Surely at least 1% to 2%?

Edited to add: OP has access to FSKAX in his 401k. Unless there are additional administrative fees in the plan -- they aren't mentioned in the original post -- I don't see an advantage for this one person, the OP, to roll his 401k into an IRA.

[marcopolo]

But, you are generalizing (perhaps your experience) about 401k plans costs and fund availability. What you say may be true for your plan, but is not true in general. Many 401k have fees tacked on, it depends on how much of the fees the employer absorbs. Many 401k also have limited selection of funds.

Agree that one should make an informed decision, but it should be based on their own circumstances (what does their 401k offer relative to an IRA), your generalization does not apply in many circumstances.

I am not generalizing, ...

Here is what you said that i think is a generalization that is demonstrably false for many 401k plans:

401k funds also have access to the same funds that you get in retail, for much lower expense ratios. For example, I get VIIIX (Vanguard Institutional Index Trust) in my plan for 0.02% ER, whereas the retail equivalent of the same fund, VFIAX (Vanguard 500 index fund) is available at 0.04%. On a balance of $400k that I have in my plan, that's $80 per year cheaper.

There is nothing that is not offered by a 401k plan that is offered by an IRA, tax wise or distribution wise (assuming pre-tax, not Roth).

[fourwedge]

I always make it a point to discourage roll over of 401k funds into IRA plans, based on the asset protections. Do not give up those protections easily, without at least giving it some serious thought. If you do decide to still rollover to an IRA, so be it, but at least you will have made an informed decision.

Too often, people feel that when the leave the job, they MUST rollover the 401k funds to an IRA. Not true. If the amount contributed to the plan (usually this amount does NOT include roll overs of other 401k / IRA funds) is at least $5000, the employer cannot kick you out of the plan.

401k funds also have access to the same funds that you get in retail, for much lower expense ratios. For example, I get VIIIX (Vanguard Institutional Index Trust) in my plan for 0.02% ER, whereas the retail equivalent of the same fund, VFIAX (Vanguard 500 index fund) is available at 0.04%. On a balance of $400k that I have in my plan, that's $80 per year cheaper.

There is nothing that is not offered by a 401k plan that is offered by an IRA, tax wise or distribution wise (assuming pre-tax, not Roth).

I paid $51.50 in record keeping fees this year outside of the ER's on the fidelity funds. It is kept at Well's Fargo and the ER's are the same as whats offered at Fidelity. Are there other "asset protections" I'm not aware of?

Thank you for the advice.

[lakpr]

I always make it a point to discourage roll over of 401k funds into IRA plans, based on the asset protections. Do not give up those protections easily, without at least giving it some serious thought. If you do decide to still rollover to an IRA, so be it, but at least you will have made an informed decision.

Too often, people feel that when the leave the job, they MUST rollover the 401k funds to an IRA. Not true. If the amount contributed to the plan (usually this amount does NOT include roll overs of other 401k / IRA funds) is at least $5000, the employer cannot kick you out of the plan.

401k funds also have access to the same funds that you get in retail, for much lower expense ratios. For example, I get VIIIX (Vanguard Institutional Index Trust) in my plan for 0.02% ER, whereas the retail equivalent of the same fund, VFIAX (Vanguard 500 index fund) is available at 0.04%. On a balance of $400k that I have in my plan, that's $80 per year cheaper.

There is nothing that is not offered by a 401k plan that is offered by an IRA, tax wise or distribution wise (assuming pre-tax, not Roth).

I paid $51.50 in record keeping fees this year outside of the ER's on the fidelity funds. It is kept at Well's Fargo and the ER's are the same as whats offered at Fidelity. Are there other "asset protections" I'm not aware of?

Thank you for the advice.

Personally, I feel that is a very cheap price to pay to keep the much stronger Federal (ERISA) asset protections for your retirement funds, than rollover the funds to IRA and be subject them to state protections. You may be in a state where the Rollover IRA funds are also protected on an equal footing with the Federal protections; but are you sure you would not move in the future to a different state? In retirement? What are the asset protections in those other states looking like? Do you even want to be spending time on research, or simply throw $50 at it per year?

To give you an example of the power of ERISA protections: OJ Simpson. The Goldman family sued him and won multi-million dollar judgment. Yet not able to collect a single cent. Why do you think that is? His NFL pension also comes under ERISA protections. This, while he is in the state of California, which is notorious for its extremely weak protections of IRA funds (I think only first $600k protected, everything else is fair game to creditors).

IRAs are exempt only to the extent necessary to provide for the support of the judgment debtor when the judgment debtor retires as well as for the support of the spouse and dependents of the judgment debtor. This takes into account all resources that are likely to be available to support the judgment debtor when the judgment debtor retires. If other means of support are determined courts can order IRA seizure.

https://www.assetprotectionplanners.com ... -by-state/

[fourwedge]

I always make it a point to discourage roll over of 401k funds into IRA plans, based on the asset protections. Do not give up those protections easily, without at least giving it some serious thought. If you do decide to still rollover to an IRA, so be it, but at least you will have made an informed decision.

Too often, people feel that when the leave the job, they MUST rollover the 401k funds to an IRA. Not true. If the amount contributed to the plan (usually this amount does NOT include roll overs of other 401k / IRA funds) is at least $5000, the employer cannot kick you out of the plan.

401k funds also have access to the same funds that you get in retail, for much lower expense ratios. For example, I get VIIIX (Vanguard Institutional Index Trust) in my plan for 0.02% ER, whereas the retail equivalent of the same fund, VFIAX (Vanguard 500 index fund) is available at 0.04%. On a balance of $400k that I have in my plan, that's $80 per year cheaper.

There is nothing that is not offered by a 401k plan that is offered by an IRA, tax wise or distribution wise (assuming pre-tax, not Roth).

I paid $51.50 in record keeping fees this year outside of the ER's on the fidelity funds. It is kept at Well's Fargo and the ER's are the same as whats offered at Fidelity. Are there other "asset protections" I'm not aware of?

Thank you for the advice.

Personally, I feel that is a very cheap price to pay to keep the much stronger Federal (ERISA) asset protections for your retirement funds, than rollover the funds to IRA and be subject them to state protections. You may be in a state where the Rollover IRA funds are also protected on an equal footing with the Federal protections; but are you sure you would not move in the future to a different state? In retirement? What are the asset protections in those other states looking like? Do you even want to be spending time on research, or simply throw $50 at it per year?

To give you an example of the power of ERISA protections: OJ Simpson. The Goldman family sued him and won multi-million dollar judgment. Yet not able to collect a single cent. Why do you think that is? His NFL pension also comes under ERISA protections. This, while he is in the state of California, which is notorious for its extremely weak protections of IRA funds (I think only first $600k protected, everything else is fair game to creditors).

IRAs are exempt only to the extent necessary to provide for the support of the judgment debtor when the judgment debtor retires as well as for the support of the spouse and dependents of the judgment debtor. This takes into account all resources that are likely to be available to support the judgment debtor when the judgment debtor retires. If other means of support are determined courts can order IRA seizure.

https://www.assetprotectionplanners.com ... -by-state/

good to know, I had no idea. Thanks again!

[drumboy256]

I'm a long time member here but I set it and forget it.

have most of my retirement and investments in the 3 fund portfolio at Vanguard auto-re balancing annually. I haven't really kept up on the ZERO fund introduction.

I am opening an HSA at Fidelity to transfer a current HSA and am also getting ready to roll over my current 401K (which is several hundred K) in Fidelity Total Stock Market (FSKAX) as I am getting out of the corporate world in the next several weeks. Setting up my new funds I saw the ZERO FZROX funds. What is the thought process behind these funds? It is the lowest prices available (0%) for slightly less diversity? So this is only a retirement funds question. I see the disadvantage to the ZERO funds for tax loss harvesting purposes.

Is the extra diversity worth paying above ZERO %?

What is the general consensus about these funds?

What's interesting is I looked a LOT at how FZROX acted against FSKAX as to how to build my 3 fund portfolio and I realized that total index with greater stock exposure (to me at least) was worth the small expanse ratio on FSKAX vs. 0 percent on FZROX. I literally just setup my 3 fund portfolio a few weeks back and its been growing at a very rapid rate (market not withstanding) which is great to see.

I personally think FZROX is good enough for a taxable account if all other accounts are topped off and you get just about as good if not equal growth in FSKAX without the fee.