The Best of the Bad Options (Stuck in Voya for 401k)

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sach1282
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The Best of the Bad Options (Stuck in Voya for 401k)

Post by sach1282 »

Greetings!

So at my job I have a 401(k) matching program where they'll put in up to 5% if you put in 7%. Obviously I took advantage of the most matching I could, but now I have to choose among the horrible funds they have available. They defaulted me into the T. Rowe Price target date fund for my age, which has an expense ratio of 1.21%. The only funds with an expense ratio below 1% available to me are as follows:

A Voya high yield bond fund at 0.75%,
A Virtus dividend fund at 0.73%,
And two funds that track the Russel mid and small cap indexes, at around 0.5%.

They have no total stock market index. They have a "balanced fund" option but it's actually about 55% bonds and they still charge 1%. They have some large cap value and growth funds at 1.2-1.5%. Nothing else is remotely appealing. I've included a picture of the full list of funds below.

As far as I see it, my options are to either stick all my money in the dividend fund with some small and mid cap indexes on the side, or just swallow the terrible fees in the target date fund.

Thoughts?

Image
Last edited by sach1282 on Fri Jul 16, 2021 5:46 pm, edited 2 times in total.
supalong52
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by supalong52 »

I would just swallow the fees. Maybe you'll change employers or your employer will change the plan in the future. But right now you've got a good match so just imagine the fees are eating solely into the match.
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retiredjg
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by retiredjg »

Odd list. I think I'd just use the mid-cap fund and build the rest of the portfolio in other accounts.

Very odd that there is no large cap index. So odd that you might ask if part of the list got left off or something.

What is the Voya fixed account paying? If decent, you could use that as a bond allocation.
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sach1282
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by sach1282 »

retiredjg wrote: Fri Jul 16, 2021 5:51 pm Very odd that there is no large cap index. So odd that you might ask if part of the list got left off or something.
I'm sure that's the full list. The picture was a short summary table. I went into full editing mode in a different part of the website when I was checking expense ratios.
retiredjg wrote: Fri Jul 16, 2021 5:51 pm What is the Voya fixed account paying? If decent, you could use that as a bond allocation.
That one is some sort of annuity. To be honest I didn't fully understand the description. It had an enormous amount of different fees associated with it so I decided to stay away.
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F150HD
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by F150HD »

had same issue w/ Voya way back when. I hated Voya. The orange money thing was confusing, wasn't sure what the marketing angle was.

I do recall once I was leaving an S&P 500 fund appeared...you may want to ask them to add this to the list?

Voya US Stock Index Port I INGIX

expense ratio isn't great but it should be on their menu.

Else, I'd load up on the small and midcaps available.
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retired@50
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by retired@50 »

High fees stink, especially when you're part of a captive audience (plan participants).

If you have any influence with the organization you might consider this approach... Campaign for a better 401k plan.
https://www.bogleheads.org/wiki/How_to_ ... 01(k)_plan

If you need a discussion starter with whoever is in charge, you might start with the orange and gray graphic in this page about expense ratios.
https://www.bogleheads.org/wiki/Expense_ratios

The plans with high fees like this are hopefully on the way out, but not fast enough to suit many investors.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Enjoy11
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by Enjoy11 »

Yeah, I remember voya. Expensive mediocrity.

Invest in the small and mid cap indices at work. Use an IRA (maybe Roth) and buy the S&P 500 index and maybe bonds.
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sach1282
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by sach1282 »

retired@50 wrote: Fri Jul 16, 2021 7:40 pm High fees stink, especially when you're part of a captive audience (plan participants).

If you have any influence with the organization you might consider this approach... Campaign for a better 401k plan.
https://www.bogleheads.org/wiki/How_to_ ... 01(k)_plan

If you need a discussion starter with whoever is in charge, you might start with the orange and gray graphic in this page about expense ratios.
https://www.bogleheads.org/wiki/Expense_ratios

The plans with high fees like this are hopefully on the way out, but not fast enough to suit many investors.

Regards,
I actually looked into these on the Wiki when I first found out the company uses Voya. Tonight I sent out an email to find out who manages the plan on our side. I work for a small regional law firm with less than 100 employees so hopefully I'll be able to get access to whoever is in charge relatively easily. I also used to do work for the clearing companies and banks in NYC, so that might give me some additional credibility.

Wish me luck!
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dogagility
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by dogagility »

I'd invest half in the mid cap index and half in the small cap index.
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Lock
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by Lock »

I’m actually in the EXACT same situation as you with Voya. I went 100% mid-cap index and in our other 403b/taxable/roth I worked in the other components. I’ve been fairly happy with that decision thus far.
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retiredjg
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by retiredjg »

sach1282 wrote: Fri Jul 16, 2021 9:22 pm I work for a small regional law firm....
Hmmm. An employer that might actually understand the liability of offering such a poor plan. :happy

There have been a number of lawsuits the last few years about poor 401k plans. As I recall, most have been academic employers. This might catch the eye of whoever is in charge (who may have no idea the plan is as poor as it is).

You may not be able to get an overhaul, but you should be able to get this plan to offer a 500 index fund and maybe a decent low cost bond fund. The lack of a 500 index fund, combined with the presence of a mid cap and small cap index, is a notable (almost startling) absence.
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sach1282
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by sach1282 »

So, unfortunately, I was unable to move the needle on our investment options. Now I'm left with the question of how to balance out this 401(k) against my other assets. The only other thing I have is 6k in a Roth IRA account right now. By the end of 2021, I'll have about 4000 invested in 401(k), which right now is invested 100% in the Voya midcap index (equivalent to Ticker: IWR but with a 0.4% fee). Starting in 2022, I'll be contributing about 10k/year to the 401k. Do I still stick with 100% midcaps to avoid the most fees and put my entire Roth IRA in bonds to try to even out the risk profile? In an ideal world, I'd want a 70/30 or 65/35 profile overall.
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retiredjg
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by retiredjg »

YOu still need to look at the Voya fixed account. Sounds like it might be a stable value fund. Whatever it is paying is after expenses. It may be better to use that for your bond allocation than putting bonds into Roth IRA.
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sach1282
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by sach1282 »

retiredjg wrote: Sat Jul 31, 2021 2:21 pm YOu still need to look at the Voya fixed account. Sounds like it might be a stable value fund. Whatever it is paying is after expenses. It may be better to use that for your bond allocation than putting bonds into Roth IRA.
I did look into it. It's an annuity that seems to give you a flat 1% return every year. There are a lot of restrictions though and I don't completely understand it, so I'm very wary. This is their description of it https://www.voyaretirementplans.com/fun ... or/028.pdf
Northern Flicker
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by Northern Flicker »

The Virtus dividend fund is large-cap value. The Russell midcap fund is the smallest 800 stocks of the Russell 1000. They should just include a Russell 1000 fund instead. Then 90% R1000 and 10% R2000 is the total market.

You could allocate stocks as something like:

Virtus Dividend Value 45%
Russell Midcap 45%
Russell 2000 Smallcap 10%

and Pimco Total Return for bonds.
lakpr
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by lakpr »

I think everyone is overlooking the T Rowe Price Retirement series of funds. The expense ratio on these funds, on the retail side, is ranging between 0.45% for 2010 fund to 0.65% for the 2065 fund. If the expense ratios within the plan are right about the same as in retail, then choosing one of the retirement funds that either agrees with the date one wants to retire, or pick one that agrees with the risk tolerance, could be an excellent choice.

It's not cheap like Vanguard, but compared to the other options in the plan, not that bad either.
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retiredjg
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by retiredjg »

Good idea, but the original post says the ER of the target date fund is 1.21% :shock:

Hard to put lipstick on this pig. This is just a bad plan.

After all the recent lawsuits about bad 401k plans, it is hard to believe a law firm would put up with this garbage when decent low cost plans are available at reasonable cost.
lakpr
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by lakpr »

I missed that (that the ER is 1.21%)! Thanks for pointing that out.

Fully agree, this is just a horrible plan.
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legio XX
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by legio XX »

retiredjg wrote: Sat Jul 17, 2021 6:34 am
sach1282 wrote: Fri Jul 16, 2021 9:22 pm I work for a small regional law firm....
Hmmm. An employer that might actually understand the liability of offering such a poor plan. :happy

There have been a number of lawsuits the last few years about poor 401k plans. As I recall, most have been academic employers. This might catch the eye of whoever is in charge (who may have no idea the plan is as poor as it is).

You may not be able to get an overhaul, but you should be able to get this plan to offer a 500 index fund and maybe a decent low cost bond fund. The lack of a 500 index fund, combined with the presence of a mid cap and small cap index, is a notable (almost startling) absence.
I can't claim I had anything to do with it, but just before covid my academic employer added some VG index funds to the mix. They are also with Voya and there were no low ER choices before. I would be curious to find out how many people actually shifted their contributions.
Northern Flicker
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Re: The Best of the Bad Options (Stuck in Voya for 401k)

Post by Northern Flicker »

sach1282 wrote: Sat Jul 31, 2021 2:32 pm
retiredjg wrote: Sat Jul 31, 2021 2:21 pm YOu still need to look at the Voya fixed account. Sounds like it might be a stable value fund. Whatever it is paying is after expenses. It may be better to use that for your bond allocation than putting bonds into Roth IRA.
I did look into it. It's an annuity that seems to give you a flat 1% return every year. There are a lot of restrictions though and I don't completely understand it, so I'm very wary. This is their description of it https://www.voyaretirementplans.com/fun ... or/028.pdf
This is essentially a stable value fund. If the bond funds available have high expense ratios, this could be the best fixed income option in the plan. That said, you do well not to invest in it without understanding it well. These can have complex rules and restrictions. For instance, the equity wash rule is that they don't want participants moving back and forth between a bond fund, arbitraging against interest rate moves. The 1% looks like the guaranteed minimum rate, not a fixed rate.

You may want to understand the rate. And the provider has an AM Best financial strength rating of A, which is "Excellent", meaning excellent ability to meet obligations. There are 2 higher ratings. You would want to understand the underlying portfolio if possible to understand the risks, but that may be very difficult.

Stable value funds also can have triggering events like corporate layoffs or plan termination or terminating the use of the SVF in the plan that can lead to withdrawals being processed at market value instead of stable value.

So these are complex, but if well implemented, they can be attractive fixed income investments.
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