Fund choices in Nationwide 401k

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fefifofum
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Fund choices in Nationwide 401k

Post by fefifofum » Sun May 27, 2018 12:18 am

Hello Bogleheads! I have recently changed jobs and would appreciate a sanity check and feedback on how best to deal with a 401k situation.

My previous employer was essentially a megacorp with a very competitive, low-fee 401k situation. My new employer is much smaller (around 200 people) and I am confronted with what appears to be a classic not-so-great 401k, in this case offered by Nationwide and with financial advisory service by Raymond James.

I believe it's probably worth it to just hold my nose and continue to contribute the full $18,500 to the plan each year. I have a 4% match, and beyond that the tax benefits are still significant. So, what I'm trying to determine is which funds to invest in to meet my asset allocation goals as cheaply as possible.

My asset allocation is 75% stock / 21% bonds / 4% cash. For my stock allocation, I seek to hold U.S. and international equities at roughly market capitalization. Right now I hold these equities in the following places:
  • U.S. Equities: mostly in a taxable account, Roth IRA, and Traditional IRA, with a little bit in the old company 401k.
  • International Equities: mostly in my old company 401k
  • Bonds: in my old company 401k
  • Cash: in my taxable account
International and bond options mostly stink in this new 401k. So, what I think I'd like to do is invest in the closest equivalent to Vanguard Total Stock Market (VTSAX) fund that I can. I will maintain my asset allocation as needed by rebalancing in my old 401k (which is by far my largest account), and by buying an international index fund in my taxable account if necessary.

What I'm scratching my head over a bit is how best to get close to VTSAX in the new 401k. Listed below are my options. In my pamphlet, each fund shows a Net AMC / Asset Free in addition to the Net Expense Ratio. In another column it adds these together to show the total annual operating expenses of each fund as a percent. I've shown the total annual expenses for each fund and I've included only the options where it is 1% or less.

In a separate place in my pamphlet it discloses that our Raymond James Fin Serv Advisors will also be charging us a 0.25% annual "investment manager fee", which I assume is on top of the fees I'm listing below. Pity I can't opt out of their services.

SMALL-CAP STOCKS

NW SmCap Indx R6 (GMRIX): 0.86%

MID-CAP STOCKS

NW MdCap Mkt Indx R6 (GMXIX): 0.87%
Vngrd MdCap Gr Indx Inv (VMGIX): 0.79%
Vngrd MdCap Val Indx Adml (VMVAX): 0.67%

LARGE-CAP STOCKS

Clvrt Soc Indx I (CISIX): 0.79%
NW S P 500 Indx R6 (GRMIX): 0.77%
Vngrd Eq Inc Adml (VEIRX): 0.77%
Vngrd Val Indx Adml (VVIAX): 0.66%

BALANCED

Variety of Vanguard Target Retirement Funds (2020-2060) at 0.74% - 0.76%
Vngrd Trgt Rtrmt Inc (VTINX): 0.73%

U.S. BONDS

DFA Intmd Govt FxdInc Inst (DFIGX): 0.72%

Here are some options I'm considering.

OPTION 1
I'm thinking the simplest "close enough" option for now might be just to invest entirely in GRMIX, which is Nationwide's S&P 500 index.

OPTION 2
Another option I am considering is trying to put together a mix of large, small, and mid-cap funds to try to simulate a whole market fund. For
example I could put together something with the Nationwide options like:
  • 75% GRMIX (Large-cap)
  • 20% GMXIX (Mid-cap)
  • 5% GMRIX (Small-cap)
This is likely as close as I can get to a full-market fund, but fees range from 0.77% - 0.87% for those funds, and I'd be tracking 3 funds instead
of 1.

OPTION 3
The cheapest options available are VVIAX and VMVAX, both Vanguard value funds at 0.66% and 0.67%. I'm not really interested in tilting, but on the other hand a minor value tilt probably wouldn't move the needle much. I could do, say, 75% VVIAX and 25% VMVAX and call it a day.

Thoughts? Thanks for your time in looking at this!

TwstdSista
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Re: Fund choices in Nationwide 401k

Post by TwstdSista » Sun May 27, 2018 5:08 am

Option 4 -- the Target Date Fund that most closely mimics your desired AA? I'd probably do this and then maybe not even track it regularly with the rest of my portfolio. Check in once a year to make sure things haven't gone wonky and then call it a day!

Just a thought. All the funds are similar (ish) cost. And this avoids the "tilt" of your Option 3....

UpperNwGuy
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Re: Fund choices in Nationwide 401k

Post by UpperNwGuy » Sun May 27, 2018 5:40 am

TwstdSista wrote:
Sun May 27, 2018 5:08 am
Option 4 -- the Target Date Fund that most closely mimics your desired AA? I'd probably do this and then maybe not even track it regularly with the rest of my portfolio. Check in once a year to make sure things haven't gone wonky and then call it a day!

Just a thought. All the funds are similar (ish) cost. And this avoids the "tilt" of your Option 3....
+1
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oldcomputerguy
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Re: Fund choices in Nationwide 401k

Post by oldcomputerguy » Sun May 27, 2018 6:07 am

UpperNwGuy wrote:
Sun May 27, 2018 5:40 am
TwstdSista wrote:
Sun May 27, 2018 5:08 am
Option 4 -- the Target Date Fund that most closely mimics your desired AA? I'd probably do this and then maybe not even track it regularly with the rest of my portfolio. Check in once a year to make sure things haven't gone wonky and then call it a day!

Just a thought. All the funds are similar (ish) cost. And this avoids the "tilt" of your Option 3....
+1
+2. Given that the Target Date funds are practically the same cost as the straight-up S&P500 fund, I think this is the best (or, rather, least-bad) choice.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

ping1050
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Re: Fund choices in Nationwide 401k

Post by ping1050 » Sun May 27, 2018 6:12 am

I am in the same boat as you. Awful Nationwide 401k. My NW SP500 fund ONLY charges 0.57%, so that’s that I went with(plus a 0.35% admin fee).

In your shoes, I agree with above. Go with the target date fund and forget it. Its the least bad option for sure.

I actually had successfully negotiated/pestered the coporate heads enough that they’re going to switch 401k providers.

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ruralavalon
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Re: Fund choices in Nationwide 401k

Post by ruralavalon » Sun May 27, 2018 9:21 am

I suggest option 3.2, Vanguard Value Index Fund Admiral Shares (VVIAX) ER 0.66% by itself for domestic stocks. It has a lower expense ratio and has outperformed GRMIX in total return over the 20 years since GRMIX was created.

Option 1, Nationwide S&P 500 Index Fund R6 (GRMIX) ER 0.77% has a higher expense ratio by 0.11%, but is closer to a total stock market index fund and is "good enough" by itself for domestic stocks if closer to total stock market is the criteria.
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Wildebeest
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Re: Fund choices in Nationwide 401k

Post by Wildebeest » Sun May 27, 2018 9:43 am

I feel your pain in the high ER in your fund choices.

I would go for option 3.

My suggestions are:
Check to see if your 401 K allows you to transfer your contributions out once a year to a low ER IRA. If you are over 59.5 you are for sure.
Check to see if you have self directed brokerage option.
Read the Wiki as how to advocate for a better 401 K.

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fefifofum
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Re: Fund choices in Nationwide 401k

Post by fefifofum » Sun May 27, 2018 5:48 pm

Thanks to everyone who answered! I'm torn between the new "Option 4" -- using a Target Date Fund -- and "Option 3.2" -- just using VVIAX. My gut feeling is that they are both decent, simple options and either approach would be fine, so maybe I'll flip a coin or something. :-) The idea of avoiding the Nationwide funds appeals to me because I'd much rather support Vanguard than Nationwide with my dollars!
Wildebeest wrote:
Sun May 27, 2018 9:43 am
Check to see if your 401 K allows you to transfer your contributions out once a year to a low ER IRA. If you are over 59.5 you are for sure.
I doubt this plan supports in-service rollovers for me (I'm 42), but it's worth asking. My understanding is that the insurance-company based plans rarely do unless you are 59.5.
Wildebeest wrote:
Sun May 27, 2018 9:43 am
Check to see if you have self directed brokerage option.
Nationwide has something called "Fund Window" which "allows you access to hundreds of mutual funds with no additional trading fees." Does that sound like what you mean? It does say "asset fees for some of these options may be higher than the options your Plan representative selected". I will try to get to the bottom of what this actually means too!
Wildebeest wrote:
Sun May 27, 2018 9:43 am
Read the Wiki as how to advocate for a better 401 K.
I've learned that there may already be a 401 K change in the works from Nationwide to Empower. When is unclear. Whether it ends up being better, worse, or about the same... also unclear.

I think I just need to enroll using one of the above options, and then once I'm actually in the system I can start probing at these more detailed questions. Thanks for your help thinking through my options!

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ruralavalon
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Re: Fund choices in Nationwide 401k

Post by ruralavalon » Mon May 28, 2018 10:20 am

The law does not permit in-service rollovers (of your employee contributions or the employer match) before age 59.5 if you are still employed. That does not depend on what your 401k plan says. EDIT to add link: TFB blog post, "In-Service Withdrawal: The Law and The Plan Rules".


Look into the "Fund Window" feature. That sounds promising. Find out what low expense ratio index funds can be used. Find out if there is an annual fee to use the window, or any per transaction fee.
.
You are correct, the most important thing is to enroll and get started with your contributions.
Last edited by ruralavalon on Mon May 28, 2018 1:30 pm, edited 2 times in total.
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midareff
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Re: Fund choices in Nationwide 401k

Post by midareff » Mon May 28, 2018 10:27 am

While in my working years we had Nationwide. After the first $10K they let you escape to Schwab as a Tier6?, as I recall. There you could get ripped off buying some Vanguard funds for a $75 transaction fee.

fefifofum
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Re: Fund choices in Nationwide 401k

Post by fefifofum » Wed May 30, 2018 12:40 pm

ruralavalon wrote:
Mon May 28, 2018 10:20 am
The law does not permit in-service rollovers (of your employee contributions or the employer match) before age 59.5 if you are still employed. That does not depend on what your 401k plan says. EDIT to add link: TFB blog post, "In-Service Withdrawal: The Law and The Plan Rules".
Thanks for clarifying this! It did seem strange to me that this would be a per-plan feature and not something defined by law. Makes total sense.
ruralavalon wrote:
Mon May 28, 2018 10:20 am
Look into the "Fund Window" feature. That sounds promising. Find out what low expense ratio index funds can be used. Find out if there is an annual fee to use the window, or any per transaction fee.
I contacted the financial adviser to get clarification on how this works, and learned... it's completely moot, because we are moving over to Empower before the end of this summer. :-) He said that fees would be decreasing, and he also asked me if there were any funds I especially would like to see available in the new plan. I've asked for the classic components of the three-fund portfolio: Vanguard Total Stock, Vanguard Total Bond, and Vanguard Total International Stock. Not sure if I'll get them, but if I do this could be a very big upgrade!

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Earl Lemongrab
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Re: Fund choices in Nationwide 401k

Post by Earl Lemongrab » Wed May 30, 2018 1:25 pm

ruralavalon wrote:
Mon May 28, 2018 10:20 am
The law does not permit in-service rollovers (of your employee contributions or the employer match) before age 59.5 if you are still employed. That does not depend on what your 401k plan says. EDIT to add link: TFB blog post, "In-Service Withdrawal: The Law and The Plan Rules".
No, that's wrong. Only your employee contributions (pretax or Roth) are restricted. Company contributions of any kind are eligible for distribution (at plan discretion). The link you provide even says that:
When it comes to rolling over money from a 401k plan while still working for the employer, the law allows rolling over:
Employer contributions: match, profit sharing
Employee after-tax (not Roth) contributions
Employee pre-tax and Roth contributions only if the employee reaches age 59-1/2
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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