Help with "401k"

sean31081 · Post by **sean31081** » Sun Oct 25, 2009 3:49 pm

The reason why I have 401k in quotes is because it looks like its wrapped in a group variable annuity. The "401k" is called Lincoln Director managed by Lincoln Financial. Because this is my first post the system will not let me post the link to the prospectus.

My question is this:

My employer offers 50% match on the first 6% of contribution. After I get that match and max out IRA (or Roth) do you think it is worth maxing out the rest of this "401k" plan? Is a better option just to take the match, max out IRA (or Roth) and invest in tax-efficient index funds?

As a potential piece of useful information, I'm in the 28% tax bracket and plan on staying with the employer for the foreseeable future.

TJAJ9 · Post by **TJAJ9** » Sun Oct 25, 2009 3:58 pm

I would just get the full company match. If the 401(k) is that bad, it probably is not worth putting anything in after that.

sean31081 · Post by **sean31081** » Sun Oct 25, 2009 5:03 pm

Yeah, that's what I suspected would be the answer.

Thx!

InvestingMom · Post by **InvestingMom** » Sun Oct 25, 2009 5:49 pm

Is this the link?

http://www.lfg.com/LincolnPageServer?LF ... index.html

I can't quite grasp what this is? In any case I have to believe that the fees are high and so I vote for going with the match and not investing any more.

Meanwhile it might not hurt to talk to your 401K administrators. At the very least they should be able to understand that no person should invest in a vehicle that they don't understand and using an advisor and vehicle like this only creates more confusion for the employees. IMHO

sean31081 · Post by **sean31081** » Sun Oct 25, 2009 5:56 pm

Yep, that is the product.

TheEthicalAdvisor · Post by **TheEthicalAdvisor** » Sun Oct 25, 2009 6:14 pm

My answer would be to utilize some of the best options in the VA, if you truly have a lot of extra money after the company match and IRA, that are SSgA based index funds and the stable value option for some of your money. The ER's for the funds are 0.56%-0.70%, while not cheap, are not incredibly horrible either. At the very least you could use the bond fund and other non-tax efficient funds inside of the VA structure and put your international funds and tax efficient funds in a taxable account. This way you do a little bit of both tax deferral and non-tax deferred retirement investing.

-Evan

Triple digit golfer · Post by **Triple digit golfer** » Sun Oct 25, 2009 6:20 pm

1. Invest in 401(k) just enough to get the match.
2. Max out IRA.
3. Max out 401(k).
4. Taxable investing.

That's what I'd do in your case. Unless the 401(k) fees are absolutely outrageous, you're probably still better off with it than taxable investing.

If you were in a lower tax bracket, I'd consider switching #s 2 and 3.

Good luck to you.

retiredjg · Post by **retiredjg** » Sun Oct 25, 2009 6:39 pm

The combination of "variable" and "annuity" are bad words around here (likely with good reason). However, the TIAA-CREF people are very happy with their variable annuity system.

Have you done enough research to know your plan is bad, or have you assumed it is bad because it is attached to the bad words? You know, you really did not tell us what is wrong with your plan other than it is a VA. So what is wrong with it? If you could list your plan's offerings, we would have a better picture of what is going on.

Consider that the company match pays for the high expense ratio. So if you make $120k and contribute $7,200, the company is putting in $3,600. Could that make up for the problem (whatever it is)?