help with 401k options

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Topic Author
Soobs
Posts: 16
Joined: Sun Nov 01, 2020 11:38 pm

help with 401k options

Post by Soobs »

Hey gang,

New job, new 401k provider, and new fund options..

I'm trying to come up with an easy 3-fund portfolio, but it's not quite clear with the funds available. I assume this is intentional to get you to just use the target-date fund with a ER of 0.29%. That may be the way to go, but I wanted to explore my own options and get this community's thoughts.

In general I'm aiming to do a 3-funder of Total US Equity Index, Total International Equity Index, and Total US Bond Index. The options for US equities are as follows in this new provider:

Large cap:
Vanguard Value Index Admiral Fund (VVIAX) ER 0.05%
Vanguard Growth Index Admiral Fund (VIGAX) ER 0.05%
Principal LargeCap S&P 500 Index (PLSAX) ER 0.05%

Mid/small cap:
Principal SmallCap S&P 600 (PSSIX) ER 0.05%
Principal MidCap S&P 400 (PMFPX) ER 0.05%

I had been using Vanguard Total Market Index (VTSAX) in a previous provider. At first I thought it'd be best to use PLSAX for the same portfolio function, but when comparing PLSAX against VTSAX the Vanguard Total Market has performed much better. Any advice on how to build the US Equity part of my portfolio to best replicate a "US total market" investment?

The international equities aren't exactly what I was hoping either. They are as follows:

DFA International Core Equity I Fund (DFIEX) ER 0.24%
Fidelity Emerging Markets Index Fund (FPADX) ER 0.08%
Principal Diversified International (PINPX) ER 0.43%
Vanguard International Growth Admiral Fund (VWILX) ER 0.32%

I'm thinking bite the bullet and just use DFA International Core Equity even though I'm used to a much lower ER on my old Vanguard plan.

For bonds I have a good low cost total market option so no issue there.
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vineviz
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Location: Baltimore, MD

Re: help with 401k options

Post by vineviz »

Soobs wrote: Thu Sep 22, 2022 1:06 pm Hey gang,

New job, new 401k provider, and new fund options..

I'm trying to come up with an easy 3-fund portfolio, but it's not quite clear with the funds available. I assume this is intentional to get you to just use the target-date fund with a ER of 0.29%. That may be the way to go, but I wanted to explore my own options and get this community's thoughts.

In general I'm aiming to do a 3-funder of Total US Equity Index, Total International Equity Index, and Total US Bond Index. The options for US equities are as follows in this new provider:

In a 401k I tend not to worry too much about keeping the number of funds to a minimum because regular contributions tend to keep things largely in balance.

I might suggest

50% PLSAX
10% PMFPX
20% DFEIX
10% FPADX
10% low cost bond fund

Or some similar combination.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
exodusNH
Posts: 5373
Joined: Wed Jan 06, 2021 8:21 pm

Re: help with 401k options

Post by exodusNH »

Soobs wrote: Thu Sep 22, 2022 1:06 pm Hey gang,

New job, new 401k provider, and new fund options..

I'm trying to come up with an easy 3-fund portfolio, but it's not quite clear with the funds available. I assume this is intentional to get you to just use the target-date fund with a ER of 0.29%. That may be the way to go, but I wanted to explore my own options and get this community's thoughts.

In general I'm aiming to do a 3-funder of Total US Equity Index, Total International Equity Index, and Total US Bond Index. The options for US equities are as follows in this new provider:

Large cap:
Vanguard Value Index Admiral Fund (VVIAX) ER 0.05%
Vanguard Growth Index Admiral Fund (VIGAX) ER 0.05%
Principal LargeCap S&P 500 Index (PLSAX) ER 0.05%

Mid/small cap:
Principal SmallCap S&P 600 (PSSIX) ER 0.05%
Principal MidCap S&P 400 (PMFPX) ER 0.05%

I had been using Vanguard Total Market Index (VTSAX) in a previous provider. At first I thought it'd be best to use PLSAX for the same portfolio function, but when comparing PLSAX against VTSAX the Vanguard Total Market has performed much better. Any advice on how to build the US Equity part of my portfolio to best replicate a "US total market" investment?

The international equities aren't exactly what I was hoping either. They are as follows:

DFA International Core Equity I Fund (DFIEX) ER 0.24%
Fidelity Emerging Markets Index Fund (FPADX) ER 0.08%
Principal Diversified International (PINPX) ER 0.43%
Vanguard International Growth Admiral Fund (VWILX) ER 0.32%

I'm thinking bite the bullet and just use DFA International Core Equity even though I'm used to a much lower ER on my old Vanguard plan.

For bonds I have a good low cost total market option so no issue there.
Are you sure the ER on the 500 fund is accurate? Also, it may be difficult to compare it with a typical 500 fund because it has a sales charge (load). You probably don't pay that in a 401k, but the total return graphs may remove it.

You can get pretty close to the S&P 500 by going 50/50 with the two Vanguard large cap funds.

The DFA international is probably the one I'd choose, too.

If you're not rolling your old 401k to this plan, you can always choose the two Vanguard funds here and compensate in your other 401k / taxable account with their better international holdings.
Topic Author
Soobs
Posts: 16
Joined: Sun Nov 01, 2020 11:38 pm

Re: help with 401k options

Post by Soobs »

vineviz wrote: Thu Sep 22, 2022 1:23 pm
Soobs wrote: Thu Sep 22, 2022 1:06 pm Hey gang,

New job, new 401k provider, and new fund options..

I'm trying to come up with an easy 3-fund portfolio, but it's not quite clear with the funds available. I assume this is intentional to get you to just use the target-date fund with a ER of 0.29%. That may be the way to go, but I wanted to explore my own options and get this community's thoughts.

In general I'm aiming to do a 3-funder of Total US Equity Index, Total International Equity Index, and Total US Bond Index. The options for US equities are as follows in this new provider:

In a 401k I tend not to worry too much about keeping the number of funds to a minimum because regular contributions tend to keep things largely in balance.

I might suggest

50% PLSAX
10% PMFPX
20% DFEIX
10% FPADX
10% low cost bond fund

Or some similar combination.
Yes, I should have clarified that. It's fine if I have more than three funds, but I'm trying to mimic the investments of a total market index with what is available.
Joe Public
Posts: 108
Joined: Mon Jul 27, 2020 8:36 pm

Re: help with 401k options

Post by Joe Public »

PLSAX didn't lag too terribly behind VTSAX or VFINX over the last 15 years according to Portfolio Visualizer:

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

Of note, PLSAX has an expense ratio of 0.40% in Portfolio Visualizer. If you are getting it for 0.05%, then the gap may be further reduced. That might be good enough for US equity investing.

Is keeping existing funds in the former employer's plan a feasible option? If so, then perhaps there is a way to use the international equity funds available there to meet your overall asset allocation requirements, at least for a while.
Topic Author
Soobs
Posts: 16
Joined: Sun Nov 01, 2020 11:38 pm

Re: help with 401k options

Post by Soobs »

exodusNH wrote: Thu Sep 22, 2022 1:25 pm
Soobs wrote: Thu Sep 22, 2022 1:06 pm Hey gang,

New job, new 401k provider, and new fund options..

I'm trying to come up with an easy 3-fund portfolio, but it's not quite clear with the funds available. I assume this is intentional to get you to just use the target-date fund with a ER of 0.29%. That may be the way to go, but I wanted to explore my own options and get this community's thoughts.

In general I'm aiming to do a 3-funder of Total US Equity Index, Total International Equity Index, and Total US Bond Index. The options for US equities are as follows in this new provider:

Large cap:
Vanguard Value Index Admiral Fund (VVIAX) ER 0.05%
Vanguard Growth Index Admiral Fund (VIGAX) ER 0.05%
Principal LargeCap S&P 500 Index (PLSAX) ER 0.05%

Mid/small cap:
Principal SmallCap S&P 600 (PSSIX) ER 0.05%
Principal MidCap S&P 400 (PMFPX) ER 0.05%

I had been using Vanguard Total Market Index (VTSAX) in a previous provider. At first I thought it'd be best to use PLSAX for the same portfolio function, but when comparing PLSAX against VTSAX the Vanguard Total Market has performed much better. Any advice on how to build the US Equity part of my portfolio to best replicate a "US total market" investment?

The international equities aren't exactly what I was hoping either. They are as follows:

DFA International Core Equity I Fund (DFIEX) ER 0.24%
Fidelity Emerging Markets Index Fund (FPADX) ER 0.08%
Principal Diversified International (PINPX) ER 0.43%
Vanguard International Growth Admiral Fund (VWILX) ER 0.32%

I'm thinking bite the bullet and just use DFA International Core Equity even though I'm used to a much lower ER on my old Vanguard plan.

For bonds I have a good low cost total market option so no issue there.
Are you sure the ER on the 500 fund is accurate? Also, it may be difficult to compare it with a typical 500 fund because it has a sales charge (load). You probably don't pay that in a 401k, but the total return graphs may remove it.

You can get pretty close to the S&P 500 by going 50/50 with the two Vanguard large cap funds.

The DFA international is probably the one I'd choose, too.

If you're not rolling your old 401k to this plan, you can always choose the two Vanguard funds here and compensate in your other 401k / taxable account with their better international holdings.
All the ER's listed are correct. You may notice some differences with the Principal fund tickers I listed because those funds within my 401k are basically the same as those tickers, but plan specific options lacking actual ticker symbols.

S&P 500/Vanguard Growth/Vanguard Value was kind of what I was thinking too to cover the total US equities market.
Topic Author
Soobs
Posts: 16
Joined: Sun Nov 01, 2020 11:38 pm

Re: help with 401k options

Post by Soobs »

Joe Public wrote: Thu Sep 22, 2022 1:30 pm PLSAX didn't lag too terribly behind VTSAX or VFINX over the last 15 years according to Portfolio Visualizer:

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

Of note, PLSAX has an expense ratio of 0.40% in Portfolio Visualizer. If you are getting it for 0.05%, then the gap may be further reduced. That might be good enough for US equity investing.

Is keeping existing funds in the former employer's plan a feasible option? If so, then perhaps there is a way to use the international equity funds available there to meet your overall asset allocation requirements, at least for a while.
Yes, PLSAX is an ER of 0.05% via the plan. I had used google finance to compare funds, but I will give this website a look. Perhaps there's actually little difference.
exodusNH
Posts: 5373
Joined: Wed Jan 06, 2021 8:21 pm

Re: help with 401k options

Post by exodusNH »

Soobs wrote: Thu Sep 22, 2022 1:32 pm S&P 500/Vanguard Growth/Vanguard Value was kind of what I was thinking too to cover the total US equities market.
Ah, then just stick with the 500 fund. It's returns are not meaningfully different from a total market fund. Trying to use tools to compare the public, class A fund with VTSAX isn't valid because the A shares fees are really high.
Topic Author
Soobs
Posts: 16
Joined: Sun Nov 01, 2020 11:38 pm

Re: help with 401k options

Post by Soobs »

Does the portfoliovisualizer backtest results include or exclude expense ratios in the final balance & yield results?
the_wiki
Posts: 354
Joined: Thu Jul 28, 2022 11:14 am

Re: help with 401k options

Post by the_wiki »

If you want to replicate Total market, you can do 85% Large Cap, 10% Mid Cap and 5% Small cap.

Or if you don't like the Principal funds, you can just do 50-50 Vanguard LC growth and LC Value and call it close enough.

That DFA international fund is actually a really good fund option for international. Has significantly outperformed VXUS despite the higher fee.
exodusNH
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Joined: Wed Jan 06, 2021 8:21 pm

Re: help with 401k options

Post by exodusNH »

Soobs wrote: Thu Sep 22, 2022 5:32 pm Does the portfoliovisualizer backtest results include or exclude expense ratios in the final balance & yield results?
It definitely includes the published 0.40% ER. I'm not sure if it takes the 1.5% load into account.
5outof10
Posts: 125
Joined: Fri Oct 22, 2021 8:03 pm

Re: help with 401k options

Post by 5outof10 »

These offerings smell an awful lot like a Principal 401k. If so, you will want to check to see if the 401k is charging you an annual fee of 1.05% (or more!) of your balance.
EF: 20% Interest Checking, 80% VTEB in Taxable | Retirement: 72% VTI, 18% VXUS, 10% BND | I would like to own a gold bar one day, to be able to say I own a gold bar.
5outof10
Posts: 125
Joined: Fri Oct 22, 2021 8:03 pm

Re: help with 401k options

Post by 5outof10 »

These offerings smell an awful lot like a Principal 401k. If so, you will want to check to see if the 401k is charging you an annual fee of 1.05% (or more!) of your balance. This charge is in addition to the fund expenses you have shared with us.
EF: 20% Interest Checking, 80% VTEB in Taxable | Retirement: 72% VTI, 18% VXUS, 10% BND | I would like to own a gold bar one day, to be able to say I own a gold bar.
lakpr
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Joined: Fri Mar 18, 2011 9:59 am

Re: help with 401k options

Post by lakpr »

Silly question to OP @Soobs. Are you being forced to exit the 401(k) plan of the previous employer, or is it your choice? I am wondering if you can invest just in the S&P 500 index in the current plan, and get your international equities and bonds allocation in the old 401(k) plan. Why must you bite the bullet and use the DFA fund?

I do something like this for the bond funds. My current plan has only one bond fund, Metropolitan West Total Return Bond fund, at an expense ratio of 0.38% or 0.4% (I forget which precisely, since I don't invest in it). My previous job 401(k) plan has VBTIX, Vanguard's Institutional version of Total Bond fund, for one-tenth the cost at 0.04%. Therefore I rebalance periodically (usually once every 6 months) switching stocks to bonds in the old plan, and buy only equities in the current plan. Between the two plans, I a to be at 55:15:30 allocations to Domestic / International / Fixed Income asset classes.
Topic Author
Soobs
Posts: 16
Joined: Sun Nov 01, 2020 11:38 pm

Re: help with 401k options

Post by Soobs »

5outof10 wrote: Thu Sep 22, 2022 8:24 pm These offerings smell an awful lot like a Principal 401k. If so, you will want to check to see if the 401k is charging you an annual fee of 1.05% (or more!) of your balance.
Holy moly... It sure does have a 1.05% "service charge" on top of the 0.29% ER for the target date funds. I don't see this charge in their stand-alone index funds though. Thank you so much for bringing this to my attention.
Topic Author
Soobs
Posts: 16
Joined: Sun Nov 01, 2020 11:38 pm

Re: help with 401k options

Post by Soobs »

lakpr wrote: Thu Sep 22, 2022 10:25 pm Silly question to OP @Soobs. Are you being forced to exit the 401(k) plan of the previous employer, or is it your choice? I am wondering if you can invest just in the S&P 500 index in the current plan, and get your international equities and bonds allocation in the old 401(k) plan. Why must you bite the bullet and use the DFA fund?

I do something like this for the bond funds. My current plan has only one bond fund, Metropolitan West Total Return Bond fund, at an expense ratio of 0.38% or 0.4% (I forget which precisely, since I don't invest in it). My previous job 401(k) plan has VBTIX, Vanguard's Institutional version of Total Bond fund, for one-tenth the cost at 0.04%. Therefore I rebalance periodically (usually once every 6 months) switching stocks to bonds in the old plan, and buy only equities in the current plan. Between the two plans, I a to be at 55:15:30 allocations to Domestic / International / Fixed Income asset classes.
That is certainly an option I'm looking at, lakpr. Might be the way to go. I appreciate it.
5outof10
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Re: help with 401k options

Post by 5outof10 »

Soobs wrote: Fri Sep 23, 2022 11:20 am
5outof10 wrote: Thu Sep 22, 2022 8:24 pm These offerings smell an awful lot like a Principal 401k. If so, you will want to check to see if the 401k is charging you an annual fee of 1.05% (or more!) of your balance.
Holy moly... It sure does have a 1.05% "service charge" on top of the 0.29% ER for the target date funds. I don't see this charge in their stand-alone index funds though. Thank you so much for bringing this to my attention.
Principal often charges the following yearly fees - in addition to ERs - on the entire account balances:
.5% Annual Asset Charge ("for record keeping") to Principal.
.5% ERISA budget for Your Financial Professional (this is the fee that the salesperson that sold your employer's owner on this plan makes. So, if your owner's Financial Advisor is an Ed Jones salesperson and that Ed Jones salesperson referred your employer's owner to Principal for this 401k then this is what the Ed Jones salesperson gets yearly.)
.02% goes to Wilshire for some compliance/fiduciary services.

These are not fund specific. They apply to your whole account balance and are probably netted from your performance without disclosure on statements.
EF: 20% Interest Checking, 80% VTEB in Taxable | Retirement: 72% VTI, 18% VXUS, 10% BND | I would like to own a gold bar one day, to be able to say I own a gold bar.
Topic Author
Soobs
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Re: help with 401k options

Post by Soobs »

5outof10 wrote: Fri Sep 23, 2022 12:05 pm
Soobs wrote: Fri Sep 23, 2022 11:20 am
5outof10 wrote: Thu Sep 22, 2022 8:24 pm These offerings smell an awful lot like a Principal 401k. If so, you will want to check to see if the 401k is charging you an annual fee of 1.05% (or more!) of your balance.
Holy moly... It sure does have a 1.05% "service charge" on top of the 0.29% ER for the target date funds. I don't see this charge in their stand-alone index funds though. Thank you so much for bringing this to my attention.
Principal often charges the following yearly fees - in addition to ERs - on the entire account balances:
.5% Annual Asset Charge ("for record keeping") to Principal.
.5% ERISA budget for Your Financial Professional (this is the fee that the salesperson that sold your employer's owner on this plan makes. So, if your owner's Financial Advisor is an Ed Jones salesperson and that Ed Jones salesperson referred your employer's owner to Principal for this 401k then this is what the Ed Jones salesperson gets yearly.)
.02% goes to Wilshire for some compliance/fiduciary services.

These are not fund specific. They apply to your whole account balance and are probably netted from your performance without disclosure on statements.
Ah, what a scam... I'm trying to find these details in provided paperwork, but of course there's nothing. I'll go digging.
5outof10
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Re: help with 401k options

Post by 5outof10 »

They are probably only disclosed at the administrative level - your company's HR or owner, etc should have it.
EF: 20% Interest Checking, 80% VTEB in Taxable | Retirement: 72% VTI, 18% VXUS, 10% BND | I would like to own a gold bar one day, to be able to say I own a gold bar.
Topic Author
Soobs
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Joined: Sun Nov 01, 2020 11:38 pm

Re: help with 401k options

Post by Soobs »

5outof10 wrote: Fri Sep 23, 2022 12:45 pm They are probably only disclosed at the administrative level - your company's HR or owner, etc should have it.
The literature I have online says the employer is paying all admin and plan expense fees. Also no difference between reported net vs gross expense ratios on the Principal index funds; however, those funds are notated at the end with "Separate Account" and then there's fine print about how anything with "Separate Account" is subject to group annuity or subadvisor management unless the fee is waived. Hm. Well, I'll get to the bottom of it.
5outof10
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Re: help with 401k options

Post by 5outof10 »

Your investment options don't have tickets found on exchanges because they are not exchanged on exchanges. They are annuities that are trying to act like a mutual fund.

In addition to you paying the advertised ERs and in addition to you paying the 1.02% annual fees, your employer is paying annual fees to Principal too. There is an annual fee that is paid based on the number of participants in the plan and an annual fee based on the total assets of the plan.

Just remember, the ERs and the 1.02% are deducted out of your performance. They are not necessarily line items on a statement.
EF: 20% Interest Checking, 80% VTEB in Taxable | Retirement: 72% VTI, 18% VXUS, 10% BND | I would like to own a gold bar one day, to be able to say I own a gold bar.
5outof10
Posts: 125
Joined: Fri Oct 22, 2021 8:03 pm

Re: help with 401k options

Post by 5outof10 »

How many employees does your company have?
EF: 20% Interest Checking, 80% VTEB in Taxable | Retirement: 72% VTI, 18% VXUS, 10% BND | I would like to own a gold bar one day, to be able to say I own a gold bar.
Topic Author
Soobs
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Joined: Sun Nov 01, 2020 11:38 pm

Re: help with 401k options

Post by Soobs »

5outof10 wrote: Fri Sep 23, 2022 8:13 pm Your investment options don't have tickets found on exchanges because they are not exchanged on exchanges. They are annuities that are trying to act like a mutual fund.

In addition to you paying the advertised ERs and in addition to you paying the 1.02% annual fees, your employer is paying annual fees to Principal too. There is an annual fee that is paid based on the number of participants in the plan and an annual fee based on the total assets of the plan.

Just remember, the ERs and the 1.02% are deducted out of your performance. They are not necessarily line items on a statement.
The only mention of the 1.05% "service charge" is on the Principal target-date funds prospectus so it's going to be interesting to find out if they planted it somewhere else to apply on the remaining available fund options. I've no doubt they'll be more fees that they aren't making transparent. I'm curious why more companies don't just use Vanguard, Fidelity, or Schwab as 401k providers? Do these three not find much benefit in providing accounts to small companies or are they just cost prohibitive to small/medium business?
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Wiggums
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Re: help with 401k options

Post by Wiggums »

Even if the company used Vanguard as the administrator, it’s up to your company to decide how much of the administration costs they are willing to absorb. I was fortunate to have an employer who was willing to cover the 401k, medical and life insurance costs for most of my career. After we were acquired, they made the employee share in the costs. So i’ve seen both sides of the coin.
Investors need to be better informed about the costs they pay. “High fund fees can be hazardous to your wealth in the same way that high calories can be hazardous for your health.”
Topic Author
Soobs
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Re: help with 401k options

Post by Soobs »

Wiggums wrote: Sat Sep 24, 2022 9:10 am Even if the company used Vanguard as the administrator, it’s up to your company to decide how much of the administration costs they are willing to absorb. I was fortunate to have an employer who was willing to cover the 401k, medical and life insurance costs for most of my career. After we were acquired, they made the employee share in the costs. So i’ve seen both sides of the coin.
Yes, but everywhere I've worked that uses one of those big three just seem to have more transparency and a plethora of low-cost funds whether target date or index. I have to wonder if many small/medium business simply aren't educated on most of this stuff and just pick whatever sales-pitch sounded good at the time. Or maybe there simply aren't many great options for smaller business? I've seen so many plans in the past where there's often a lot of hands in the cookie jar (multiple subadvisors) that don't contribute anything, but are getting paid anyway. Just a big waste. The Principal target date funds on this account are a great example. A total ER of 1.34% and for what? A target-date fund historically performing average to below-average. Yikes.
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