401k Help. They are removing index funds.

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Soon2BXProgrammer
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Joined: Mon Nov 24, 2014 11:30 pm

Re: 401k Help. They are removing index funds.

Post by Soon2BXProgrammer » Sat Nov 10, 2018 8:53 am

Boeing settles 401k lawsuit: 2015
https://www.reuters.com/article/us-boei ... LD20151105

Boeing offers primarily low cost index funds and is ranked #2 : 2017
https://www.investopedia.com/retirement ... companies/

Which version of Boeing do you want to be like?

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teen persuasion
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Re: 401k Help. They are removing index funds.

Post by teen persuasion » Sat Nov 10, 2018 10:15 am

rgs92 wrote:
Fri Nov 09, 2018 11:37 pm


What if the company had no 401K? Would the job be that much less valuable? The main value of a 401K is the match. The tax deferral is a slight advantage. Just contribute into the lowest cost fund enough to get the match and be done with it.
I disagree - for us, the tax deferral far outweighs any match, due to tax credit phaseouts. The applicable refundable credits are probably 4 or 5x the match annually.

rgs92
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Re: 401k Help. They are removing index funds.

Post by rgs92 » Sat Nov 10, 2018 1:26 pm

I'm still not so sure about the value of tax deferral.
If you buy a regular stock index fund or ETF, the turnover is so small it generates minimal taxes if you don't sell for a very long time, and that's the case for retirement investments.
And with bond funds paying (still) low interest, the taxes each year are still minimal on a bond market interest fund.

Even yearly rebalancing is not that big a deal.
(Maybe rebalance every 2 years. I think Mr. Bogle is not a fan of too much rebalancing. He likes to say the correct holding period is forever.)

And, unlike a 401K, you get the advantage of low tax rates on stock dividends long term capital gains.

Tax deferral was a big deal when IRAs/401Ks first arrived in the early 1980s with sky high interest rates. Now it doesn't matter that much.
And back then, the tax rates on stock dividends and long term capital gains were much higher too.

So taxable investments are fine I think and the 401K has lost much of its value as a retirement vehicle.

TIAX
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Re: 401k Help. They are removing index funds.

Post by TIAX » Sat Nov 10, 2018 5:01 pm

rgs92 wrote:
Fri Nov 09, 2018 11:37 pm
A secure job should not be taken lightly. It should be treasured as a precious gem. The expenses or returns of the company savings plan are microscopic compared to the total compensation package.
This is a terrible way to see the employer-employee relationship. Good employees are hard to find just like good employers are hard to find. And there's nothing wrong with respectfully voicing your concerns about a negative change in benefits (especially when fixing this would not add any costs to the employer).

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teen persuasion
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Re: 401k Help. They are removing index funds.

Post by teen persuasion » Sat Nov 10, 2018 6:01 pm

rgs92 wrote:
Sat Nov 10, 2018 1:26 pm
I'm still not so sure about the value of tax deferral.
If you buy a regular stock index fund or ETF, the turnover is so small it generates minimal taxes if you don't sell for a very long time, and that's the case for retirement investments.
And with bond funds paying (still) low interest, the taxes each year are still minimal on a bond market interest fund.

Even yearly rebalancing is not that big a deal.
(Maybe rebalance every 2 years. I think Mr. Bogle is not a fan of too much rebalancing. He likes to say the correct holding period is forever.)

And, unlike a 401K, you get the advantage of low tax rates on stock dividends long term capital gains.

Tax deferral was a big deal when IRAs/401Ks first arrived in the early 1980s with sky high interest rates. Now it doesn't matter that much.
And back then, the tax rates on stock dividends and long term capital gains were much higher too.

So taxable investments are fine I think and the 401K has lost much of its value as a retirement vehicle.
I apologize - I should have said reduction of taxable income, not tax deferral.

What I'm referring to us the 21% phaseout of EITC, and since our state matches EITC at 30%, that's an effective additional 6.3% phaseout rate, on top of state income tax and federal income tax. Much of our federal tax would likely be covered by nonrefundable credits, so I won't include that, but the rest adds to a 31.3% return on 401k contributions (but not IRA). As the EITC are refundable credits, that's 27.3% in extra money to us, and 4% avoided state tax. Those refundable credits and others fund our Roth IRAs (so tax free money in and out).

I expect to be able to convert 401k to Roth over time at mostly zero federal and state tax by staying near the standard deduction (federal) and utilizing the state tax exemption on the first $20k in retirement withdrawals annually (per person).

rgs92
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Re: 401k Help. They are removing index funds.

Post by rgs92 » Sat Nov 10, 2018 7:20 pm

Thanks for clarifying that teen_persuasion. That certainly is a significant factor then.

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Jaredc
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Re: 401k Help. They are removing index funds.

Post by Jaredc » Sun Nov 11, 2018 9:39 pm

rgs92 wrote:
Fri Nov 09, 2018 11:37 pm


For heaven's sake, do not label yourself as a complainer or an unhappy employee. That is the worst thing you can do. You are playing with fire. Drop it now.
The hospital approached her about a lunch with these folks. We aren't complaining, we voiced concerns when the initial change was made but did not pursue it further. Now the big wigs at her hospital want to meet with her. Asking for advice on the meeting. Thanks.

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