$600 annual fee for 401K??

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dvdman
Posts: 3
Joined: Thu Feb 09, 2017 8:25 pm

$600 annual fee for 401K??

Post by dvdman »

Hello,

I am new to the forum and looking for some help. I lost my job a year ago. I asked my accountant to handle my 401K. Since I started my own business she advised a solo 401K. I only have $67K and she said it would cost $600 annually and $325 a quarter. It seems high, but my old company used to handle all this. What do you think?

$600 is the annual fee to run the plan from the third party administrator.

Then, based upon the money in the account being invested in the managed account program. $325 a quarter was based on an account value of $67000. That fee is a graduated fee and is broken down as follows:


This is the annual percentage rate:
$0 to $50000 2.3%
$50,001 to $100,000 2.2%
$100,001 to $500,000 2.0%
$500,001 to 1,000,000 1.5%
$1,000,001 to $2,000,000 1.0%
$2,000,000 and up 1.0
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CAsage
Posts: 1922
Joined: Sun Mar 27, 2016 6:25 pm

Re: $600 annual fee for 401K??

Post by CAsage »

I am not an expert in 401k. But... Is there any reason you could not roll that over to a plain old cheap IRA? At least that would take care of the existing money! If you are planning on new money, I am not sure which makes more sense, an individual 401k (don't you need more people for that?) or a plain old IRA or something else. How much money can you predict you will be able to salt away in this plan in the future (which might give someone a clue which plan to recommend)? More data!
A plain old cheap IRA would not require that 1~2% fee on top of whatever you choose to invest in.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
patrick
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Joined: Fri Sep 04, 2009 3:39 am
Location: Mega-City One

Re: $600 annual fee for 401K??

Post by patrick »

If you are the only employee, you can set up a solo 401k at Vanguard which has no fees other than the expenses of funds themselves (which would be Vanguard investor shares). I believe Fidelity/Schwab/etc. probably also offer similar deals.
livesoft
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Joined: Thu Mar 01, 2007 8:00 pm

Re: $600 annual fee for 401K??

Post by livesoft »

I'm laughing because I have a solo 401(k) for myself at TDAmeritrade. So far, the cost including all commissions has been less than $0.00. Yep, they paid me a bonus to start my 401(k) with them.

So if you end up paying more than $0.00 to run your 401(k), I think you are getting ripped off. I wonder what other stupid things your accountant is overcharging you for.
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Pajamas
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Joined: Sun Jun 03, 2012 6:32 pm

Re: $600 annual fee for 401K??

Post by Pajamas »

livesoft wrote:I'm laughing because I have a solo 401(k) for myself at TDAmeritrade. So far, the cost including all commissions has been less than $0.00. Yep, they paid me a bonus to start my 401(k) with them.

So if you end up paying more than $0.00 to run your 401(k), I think you are getting ripped off. I wonder what other stupid things your accountant is overcharging you for.
Good point. Call and ask if there are any bonuses being offered for transferring accounts and/or if the receiving firm will pay for any account transfer fees where the 401(k) is now, if there are any.

Definitely don't pay hundreds or thousands of dollars for a 401(k) when there is no need to do so.

Also consider getting a new accountant who will give better advice if your current accountant can't explain why that recommendation was made. An accountant is not necessarily expected to be a financial planner but that is really basic stuff. It would also be interesting for you to post the response afterwards.
PFInterest
Posts: 2684
Joined: Sun Jan 08, 2017 12:25 pm

Re: $600 annual fee for 401K??

Post by PFInterest »

dvdman wrote:Hello,

I am new to the forum and looking for some help. I lost my job a year ago. I asked my accountant to handle my 401K. Since I started my own business she advised a solo 401K. I only have $67K and she said it would cost $600 annually and $325 a quarter. It seems high, but my old company used to handle all this. What do you think?

$600 is the annual fee to run the plan from the third party administrator.

Then, based upon the money in the account being invested in the managed account program. $325 a quarter was based on an account value of $67000. That fee is a graduated fee and is broken down as follows:


This is the annual percentage rate:
$0 to $50000 2.3%
$50,001 to $100,000 2.2%
$100,001 to $500,000 2.0%
$500,001 to 1,000,000 1.5%
$1,000,001 to $2,000,000 1.0%
$2,000,000 and up 1.0
Sounds like being taken advantage of.
sport
Posts: 9831
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: $600 annual fee for 401K??

Post by sport »

It sounds like maybe your accountant would get paid a "finders fee" if you follow that recommendation. I guess accountants do not need to be fiduciaries.
CFM300
Posts: 2009
Joined: Sat Oct 27, 2007 5:13 am

Re: $600 annual fee for 401K??

Post by CFM300 »

dvdman wrote:I asked my accountant to handle my 401K. Since I started my own business she advised a solo 401K. I only have $67K and she said it would cost $600 annually and $325 a quarter. It seems high, but my old company used to handle all this. What do you think?

$600 is the annual fee to run the plan from the third party administrator.
Sounds like she's going to do the work of setting it up for you and perhaps making the contributions as well. But none of that is necessary. You can set up a solo 401(k) yourself quite easily at Vanguard, Fidelity, etc. And you can make the employee and employer contributions yourself as well. In short, no need for the services of an accountant.

Read this and also buy the book:

http://www.obliviousinvestor.com/sep-vs ... solo-401k/

If you need help, just post on this forum. Plenty of people will help you should you encounter any snags.
billfromct
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Joined: Tue Dec 03, 2013 9:05 am

Re: $600 annual fee for 401K??

Post by billfromct »

So your accountant's suggestion for a Solo 401k fee would change 2.8% ($1,900/$67,000).

My daughter opened a Solo 401k with Vanguard 2 or 3 years ago. No fee to open the Solo 401k & because she has a couple of actively managed Vanguard mutual funds, her annual expense ratio is probably .35%. If you invested in an index fund in your Vanguard Solo 401k, your expense ratio would .15%-.20%. Vanguard doesn't offer lower cost admiral funds in their Solo 401ks.

It would probably be best to rollover your old 401k into a rollover IRA with Vanguard to take advantage of Vanguard's low costs. Best to continue your retirement investments in the lowest cost mutual fund company. It's easier to start with Vanguard now and take advantage of the lower fees so those saving can compound until retirement.

bill
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JamesSFO
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Re: $600 annual fee for 401K??

Post by JamesSFO »

Wow, that's a crazy amount to pay for a solo 401K plan, it should be free or almost free. Vanguard, Fidelity, TD Ameritrade and others will do this for free.
Vanguard Fan 1367
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Joined: Wed Feb 08, 2017 3:09 pm

Re: $600 annual fee for 401K??

Post by Vanguard Fan 1367 »

John Bogle spends a lot of time in his books talking about the croupiers taking a pretty high cut of your retirement earnings. It does sound like a move to Vanguard, Fidelity, or some other low cost venue is something to consider.

I looked around a while to find a way for my small company to do a 401k. It is easy to pay quite a bit and it pays to shop around.
Upton Sinclair: "It is difficult to get a man to understand something when his salary depends on his not understanding it."
Topic Author
dvdman
Posts: 3
Joined: Thu Feb 09, 2017 8:25 pm

Re: $600 annual fee for 401K??

Post by dvdman »

I appreciate all the advice. I thought it seemed high along with the annual fee.
mc2
Posts: 184
Joined: Wed Jan 13, 2016 10:27 am

Re: $600 annual fee for 401K??

Post by mc2 »

Our 401k through work charged a 0.50% acct maint/service fee. Our owners recently switched banks for some other financial benefits, but our 401k fee went up to 0.54% :annoyed. Not sure if that helps much but that's about 1600/year for my 300k portfolio.
Wakefield1
Posts: 1059
Joined: Mon Nov 14, 2016 10:10 pm

Re: $600 annual fee for 401K??

Post by Wakefield1 »

Can the O.P. roll over the ultra expensive 401 to a Rollover IRA and then start a separate new 401 or other individual retirement plan for new money from the new job?
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jazman12
Posts: 246
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Re: $600 annual fee for 401K??

Post by jazman12 »

I would roll it over into an IRA and manage it thru Vgd or Fido for a fraction of the cost.

Get out of Dodge
Act soon... time is running out
NDfan27
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Joined: Fri Sep 30, 2016 3:19 pm

Re: $600 annual fee for 401K??

Post by NDfan27 »

jazman12 wrote:Get out of Dodge
My dad's financial adviser lives in Dodge City... and I never thought about using this line. :oops:
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