Wife has 401K Required Revenue fees. Is this normal and can someone look at her fees

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ldd4774
Posts: 17
Joined: Wed May 08, 2019 5:24 pm

Wife has 401K Required Revenue fees. Is this normal and can someone look at her fees

Post by ldd4774 »

My wife's 401K is with Transamerica and I was reviewing the statements. It has a Required Revenue fee of 0.78%. This is on top of expense ratios of the funds in her account. Is this normal or high amount. Her choices are not great. I have her in BlackRock LifePath® Index 2045 K currently. The fees are 0.14 plus the required revenue of 0.78. Is this worth still contributing to 401K. Her company match is 25% of the first 6% of her salary and we max this to the limit every year. I calculated this to be basically 1.5% of her salary. Not much!

Just want to see what others think if worth it to continue contributing or should I push money into 529 or self directed Roth instead (which we have not contributed to. We are both maxing 401K currently). The other option is I can change her funds to the IShares S&P500 Index K which has 0.03% expense ratio and the 0.78% Required Revenue service fee. I can increase our bond component on my end or her Rollover IRA from another fund. I do think the tax deferred portion of the 401K helps us pay lower taxes every year which is a good benefit. Thanks for your input.

******************************

Fees BlackRock LifePath® Index 2045 K
Fees and Expenses as of 03-02-20
Prospectus Net Expense Ratio 0.09%
Total Annual Operating Expense 0.14%

Waiver Data Type Exp. Date %
ExpenseRatio Contractual 04-30-21 0.05

**************
Explanation of Required Revenue - 0.78%

Required Revenue is the amount of compensation that must be received each year by Transamerica that is necessary to compensate
Transamerica for Plan and Participant related recordkeeping, administration, and other retirement plan services. The Required
Revenue is based on the Plan’s demographics and financial factors including, but not limited to, the number of employees, the
anticipated and actual annual contributions, and the assets in the plan.

A change to Required Revenue will increase or decrease the Plan Service Fee assessed to Participant’s accounts. A Plan Service
Fee (“PSF”) or Plan Service Credit (“PSC”) will be applied to assets allocated to each Investment Choice to ensure that Required
Revenue is maintained. The PSF or the PSC is calculated as a percentage of the assets in each Investment Choice and is assessed
monthly. A negative PSF is considered a PSC rather than a charge.
Last edited by ldd4774 on Tue Sep 22, 2020 12:15 am, edited 1 time in total.
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FiveK
Posts: 11105
Joined: Sun Mar 16, 2014 2:43 pm

Re: Wife has 401K Required Revenue fees. Is this normal and can someone look at her fees

Post by FiveK »

ldd4774 wrote: Mon Sep 21, 2020 8:54 pm My wife's 401K is with Transamerica and I was reviewing the statements. It has a Required Revenue fee of 0.78%. This is on top of expense ratios of the funds in her account. Is this normal or high amount.
Unfortunately for your wife, it is normal for insurance companies to charge high fees. In this case, it's bad but could be worse....
...worth it to continue contributing or should I push money into 529 or self directed Roth instead (which we have not contributed to. We are both maxing 401K currently).
See Expensive or mediocre choices for suggestions on the "worth it?" question.

See Investment Order for general thoughts on that topic.
mhalley
Posts: 8871
Joined: Tue Nov 20, 2007 6:02 am

Re: Wife has 401K Required Revenue fees. Is this normal and can someone look at her fees

Post by mhalley »

The fees are high, but as the above referenced wiki article says, it is still worth contributing to until the fees reach 1.7% depending on your tax bracket etc.
A 529 account is not a retirement account so it is not equivalent. With those fees, I would contribute to the match, then max out Roth and only then return to the 401k.
lakpr
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Joined: Fri Mar 18, 2011 9:59 am

Re: Wife has 401K Required Revenue fees. Is this normal and can someone look at her fees

Post by lakpr »

I would view it as a 401 k plan that has no employer match, and would still max out the contributions. But of course, if there is a limit on what you can contribute to the various retirement accounts (spouse 401k, Roth IRAs, etc.) — limit on your ability to contribute, I mean, not IRS imposed limits — then I would maximize those other accounts first before maximizing this particular plan.

I would also look at your entire marital portfolio as a whole, decide on an asset allocation ratio of stocks to bonds, then use this particular plan to house all bonds. This will let you stick to your desired AA, but limit the growth and therefore the plan fees you pay, and therefore the eventual taxes you need to pay when you withdraw in retirement.

You can’t really outrun a percentage based fee with choosing a high growth option (your proposal of using S&P 500 index fund at 0.03%), in fact it makes matters worse. Hence asking, what is the cheapest bond fund option, and also what is the “earliest” Lifepath fund in the line up? Those are the ones you should be investing in; and move your allocations in Roth and spouse 401k plans to more aggressive allocations.
Jack FFR1846
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Re: Wife has 401K Required Revenue fees. Is this normal and can someone look at her fees

Post by Jack FFR1846 »

If she's able to contribute directly to a Roth, why is she not following the path: 401k to the match, then Roth to fill?

I have had TransAmerica at one employer with no match. I literally picked whatever the lowest ER fund was, regardless of what it was, then just contributed, knowing that I would not work there forever. You can tell whether employers care about their employees by who they have pay the fees. My present employer pays all the fees and I only pay the ER. My previous (and your wife's present) employer makes the employee pay the fees because they don't really care about the employees.

I'd get her out of that TD fund and go with the lowest ER available.
Bogle: Smart Beta is stupid
nolesrule
Posts: 1860
Joined: Thu Feb 26, 2015 10:59 am

Re: Wife has 401K Required Revenue fees. Is this normal and can someone look at her fees

Post by nolesrule »

The fee is high, but I've seen and personally had worse, held my nose and still used the 401k.

I picked the lowest ER aggregate bond fund that was available to limit our overall portfolio exposure to the management fee since bonds don't grow as fast as stocks, and held all of our stock allocation in other accounts.
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