Profit Sharing Options vs Self direct account

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familymedicinedoctor
Posts: 8
Joined: Tue May 14, 2019 9:30 pm

Profit Sharing Options vs Self direct account

Post by familymedicinedoctor » Tue Jun 30, 2020 11:24 am

I recently joined a physician own medical practice. We are payed on K-1. We have a profit sharing retirement program with a minimum automatic withhold. For the first year, I was not a partner and thus could not contribute to the profit sharing plan. Thus I opened at SEP-IRA. I invested in the following four funds:

VSGX Vanguard ESG Int ETF with expense ratio 0.17%
ESGV Vanguard ESG US ETF 0.12%
VNQ Vanguard Real Estate 0.12%
BND Vanguard Total Bond 0.035%

Now I am a partner and have access to the profit sharing. Unfortunately the investment options are not great.

Fund Expense ratio
EQUITY
RWIFX 0.47
RERFX 0.51
RWMFX 0.32
SHSSX 0.86
CXXRX 0.2
DVFYX 0.72
FRUAX 0.58
HFMTX 0.8
BSPIX 0.1
JVMIX 0.86
MTCJX 0.94
TRBCX 0.69
PRDSX 0.79
TIIHX 0.36
TFEQX 0.81
VSOIX 0.92
BOND
MAHQX 0.51
PNIGX 0.96
LBNDX 0.79
ALLOCATION FUNDS
RLBFX 0.31
MALOX 0.8

I have the option of self directing the fund. In order to do this I have to pay a 100 dollar yearly fee and then 25 dollar transaction fee for each purchase.

I have two questions:
1. Can I keep investing in my SEP-IRA? Or do I legally have to use the profit sharing plan?
2. Since I will have to pay transaction costs for purchases should I bite the bullet and take higher expense ratios and not do self directed?

mhalley
Posts: 8298
Joined: Tue Nov 20, 2007 6:02 am

Re: Profit Sharing Options vs Self direct account

Post by mhalley » Wed Jul 01, 2020 8:25 am

You might get better responses if you put the names of the mutual funds. Just a quick glance shows that bspix is an S&P 500 fund, which is a perfectly fine foundation for your retirement account and cheap enough. Can you do some of each, with the majority going into the s &p and the occasional transaction to buy something else? Say quarterly?

retiredjg
Posts: 40820
Joined: Thu Jan 10, 2008 12:56 pm

Re: Profit Sharing Options vs Self direct account

Post by retiredjg » Wed Jul 01, 2020 8:35 am

familymedicinedoctor wrote:
Tue Jun 30, 2020 11:24 am
For the first year, I was not a partner and thus could not contribute to the profit sharing plan. Thus I opened at SEP-IRA.
Have you put any money in the SEP IRA for 2020?


Please list the names of the funds that have an ER less than about .60%. Find the ER specific to your plan, not the retail number. Sometimes they are different.

I have the option of self directing the fund. In order to do this I have to pay a 100 dollar yearly fee and then 25 dollar transaction fee for each purchase.
For your first few years, it would not be worth paying this. Once your balance is large, paying it might be worth it if you can keep the transactions down to one or two a year. Are you allowed to do that?

1. Can I keep investing in my SEP-IRA? Or do I legally have to use the profit sharing plan?
I don't know the answer, but it seems likely you cannot use both for the same calendar year. You said there is a minimum automatic withhold. That sounds like you must use it.

2. Since I will have to pay transaction costs for purchases should I bite the bullet and take higher expense ratios and not do self directed?
Not now. Maybe later when the fees are small compared to your balance. But maybe not if you must purchase 26 times a year.

This number can be calculated once you pick the usable funds.

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