Company 401k Plans

Top 80. Feb 17, 1999 6:36 AM

» TimYounkin - Vanguard & Fidelity/Index Funds

Although Fidelity is the largest family, the money just poured into Vanguard last year. I think the ratio was about 4:1. That is for every dollar that was invested in Fidelity there was four dollars invested in Vanguard. It won't be long before Vanguard becomes the largest fund family.

Once you learn that index funds usually outperform most manage funds, employers will have to demand index funds for their retirement plans. Since Vanguard has a wide selection of index funds at very low costs I think Vanguard will set the Gold Standard for retirement plans and even investing outside retirement plans.

Investing in index funds may be boring but it will make you rich.

-- posted by TimYounkin

Top 81. Feb 18, 1999 11:27 PM

» JenL_3 - Eight-Step Program for 401K

This from Money magazine 3/99 issue, but you can read it on-line at
Supercharge your 401(K).

One of the topics discussed is Asset Allocation, and includes a risk calculator to help calculate the risks in different asset allocations.

....J.L.

-- posted by JenL_3

Top 82. Feb 19, 1999 10:28 AM

» TimYounkin - Penelope Wang

Jen, thanks for the link. Penelope Wang is one of my favorite writers. Here is another article of hers titled How to make the most of your 401(k).

-- posted by TimYounkin

Top 83. Feb 24, 1999 11:41 AM

» JenL_3 - 401K Plan Question

I am just bringing this thread up to the top again, because am referring someone from the BB site over here....J.L.

-- posted by JenL_3

Top 84. Feb 24, 1999 11:47 AM

» Kevin_Squires - self directed 401K

Hi, I am new to this site. I was told that you may be able to help me with a question. Is it possible to have a corporate 401K plan that has a "self directed" option? I would like to suggest that my company add a self directed option for those employees that know of no-load funds that they would like to own. Thanks for any help you can provide. Kevin

-- posted by Kevin_Squires

Top 85. Feb 24, 1999 12:48 PM

» TimYounkin - re:self directed 401(k) plans

Kevin, your employer can have more than just one 401(k) plan to offer its employees. In fact, this may be a good idea because if your job just has just one 401(k) plan that is kind of like saying your employer did all the research and found the best 401(k) plan available for its employees. By having more than one 401(k) plan to choose from your boss is giving some additional responsibility to its employees as to which plan to choose from.

Your job will still need to set up all the 401(k) plans which can be very costly. I read in one article that it is a good idea to have about four 401(k) plans to choose from however I rarely see this offered to many employees. If I understand your question correctly, you want employees to choose their own fund family for their 401(k) plans. right? Unfortunately, I don't think this is possible. I think your job still needs to set up all 401(k) plans to be offered to their employees first. But if I am wrong, then please please repost and tell us how we can accomplish this. There are thousands of employees who want no load fund families as their retirement plan instead of plans charging high fees. If there is an easy way to do this we are all want to know how.

Have you already tried educating your employer about 401(k) plan fees?

-- posted by TimYounkin

Top 86. Feb 24, 1999 1:21 PM

» Kevin_Squires - self directed 401k

Tim,
We currently have several funds to choose from for my company's 401K. These funds include Money Market, Income, Growth & Income, and Growth categories. Funds are selected from Merrill Lynch, and Mainstay. All have the loads waived. My gripe is that there are no selections for Europe, none for total stock market, none for small caps, and none for Wilshire 5000. The funds that are available seem to be dogs in that they are drastically under performing. For instance, our main choice for growth last year was Merrill Lynch's growth A. It was down (negative) 23% last year! I lost every cent of gain for the past eight years! That is 50% off the S&P for the year. I was hoping that we would be able to expand our choices to include funds like Vanguard, T. Rowe Price etc... From the sounds of my responses, it is not possible. Kevin

-- posted by Kevin_Squires

Top 87. Feb 25, 1999 12:09 PM

» TimYounkin - Index Funds

Maybe I should have asked, "Have you educated your boss about index funds?" I hope your 401(k) plan has at least a fund that mimics the S&P 500 index. Many financial advisors are recommending setting some portion of your asset allocation into this fund for the long haul. I am currently placing 100% of my 401(k) money into a fund which is suppose to mimic the S&P 500 index. I wouldn't recommend my asset allocation to just anyone but here is why I do it. My current and only 401(k) plan to choose from is in my opinion a poor one because of fees that are in my opinion kind of on the high side. So high, that I figure I could do better investing in taxable no load index funds. Before I go there I am sure I max out my Roth IRA and also my wife's every Jan first or on the first trading day of the year. Reason one, the fund that mimics the S&P 500 has fees totally about 1.68% (the lowest fees offered by my 401k plan yikes!) last time I checked. Reason two, index funds in general usually outperform managed funds (partly because of lower fees) Since I get a 5% match on the first 4% I put in I only contribute 4% of my salary, that way I still get my employers maximum match. I used to contribute the max until I realized the fees I was forced to pay behind my back. Four percent of my salary isn't much ergo I am not really hurting my self by contributing 100% into just one fund. When I look at all the mutual funds I have (which is only 5 Vanguard funds and my 401k fund) I see the asset allocation that I want.

You mentioned Europe and Wilshire 5000. It just so happens that I have the European Index and my wife has the total stock market index which is suppose to mimic the Wilshire 5000 Equity Index. My European index isn't doing so well. I must have bought on the high side. Oh well, I'll still keep it for the long haul since index funds in general usually do very well and I never time the market.

I would also just like to add for those daring enough to invest on their own rather than in a subpar 401(k) plan. I sure hope you have discipline! You need a lot of discipline to send that investment payment every 2 weeks or every month and not touch that money until retirement time. This is kind of built into the 401(k) plan and just about forces you to save. So remember, discipline, discipline, and discipline.

-- posted by TimYounkin

Top 88. Feb 28, 1999 8:28 AM

» geezard - Expenses eating away returns?

I am meeting with my employer this week as to some employees' concerns about our 401(k) plan. I've been asked to this meeting so I want to tread gently. I have definetly been lobbying especially after we received our 4th Q statements from our new record keeper. My balance shows I made nothing off of $6,000 principal in 1998 and most other folks are equally disenchanted with their returns. We fear high fees may be the case since I had nothing in int'l or small cap and thought I had the best fund choices in the lot. We are a mid to large size company with over 2,000 in this plan. Top ranking employees (directors) are in another plan however they choose and select all funds and arrangements for our plan and we are not asked to participate in this selection. In otherwords, they do not have the same disease. I feel cost to them may be more important than the product itself. Are any costs to them a "tax deductible" item? I guess I should be grateful that they placed us in a plan at all. All my personal feelings aside, in preparation for this one on five meeting (I being the "Hans Solo"), I have attempted to itemize expenses per each mutual fund prospectus as Tim suggested. Please keep in mind that this doesn't give the full picture since my employer only pays trustee's fees and record keeping with plan participants bearing the cost for all admin. fees associated with this plan from the trust plan assets. I believe the underlying trust itself may be the big problem with our plan. In addition to the below mentioned expense ratios per mutual fund there are other expenses unknown to me at this time to me. Most of these funds are institutional class (Y). Does this give any advantage to plan participant or employer only? I have made some editorials below as to each fund which are strictly my own opinion after researching each. Here is what I was able to ascertain:

IDSY CASH MGT FUND CURRENT YIELD 5.30%. Appears that .56% is charged on daily net assets and paid monthly to the fund mgr., with a $20.00 transfer fee per account paid yearly.

IDSY BOND FUND (IDBYX) = .76% E/R - This is a corporate bond fund that is currently yielding only 5%. (my friend's statement indicates her returns have been zilch after fees were expensed so I suggested she may want to place her money elsewhere)

IDSY GROWTH FUND (IDRYX) = .80% E/R
(appears to be doing well for now and even being an insurance company mutual fund is my top choice for now)

JANUS OVERSEAS (JAOSX) = 1.02% E/R
(good fund management and fortunately mostly European equities and I have chosen this one as well; however, don't know why we couldn't get some Janus domestic growth funds!) Perhaps IDS doesn't want the competition!

UAM FAM SM CO (FMACX) = 1.03%
(rated as #88 out of 99 small cap funds - very poor performance) won't go there! Where's the fiduciary duty in selecting this one?

AMERICAN CENTURY EQUITY GROWTH (ADVISOR CLASS) (BEQAX) = 1.46% (includes .50% advisor fee unless waived (haven't ascertained that yet!)
(this is a value fund - not morningstar rated and showed a decent return last year, I had previously chosen this for some portion but recently dropped it as it appears to be very actively managed with 161% turnover ratio (2 x the category) and twice as many stocks and has been heading south) expenses may wipe out any realized return!

AMERICAN EXPRESS TRUST EQUITY INDEX II (this is a privately held collective trust and is supposed to resemble the index 500 funds) .35% is charged against the daily net assets paid monthly for managing this one. 90% stocks and 10% cash convertibles for hedging purposes. Actually the expenses seem low, but do I want to trust a non-publicly traded product? any thoughts?

My own Company Stock Fund (shares are now placed in units) = expenses are unknown
(Our stock is doing great and even outperformed the S+P 500, but not sure if I want to invest very much in this due to taxation issues if rolled over to an IRA or at time of distribution at retirement) Capital gains perhaps? Should this be a big concern if this is outperforming our other fund choices?

My concerns are 1) lack of disclosure as to what type of product we are in and fees associated with each (i.e. possible M&E, and many more, if an insurance product and in annuities; and 2) mutual fund choices; and 3) the portfolio blend if no balance funds or good low expense index funds other than the privately heldAmerican Express trust one. Also, the bond fund seems inferior (mostly BB corporate or junk bonds) and I feel our portfolio doesn't have any low risk investment options other than the extreme low returns on the money market and bond funds (which fees are virtually stripping away) I don't even think our employer really knows exactly what they bought into but I may be wrong which may account for the lack of disclosure to employees. I will give them the benefit of the doubt here. Any suggestions as to what I should bring with me to the meeting and/or how I should present my case without seeming intimidating. Do I even have any valid complaints or should I be thankful what what I got? I can place 20% of my income in this plan and, if able to achieve it, I can defer up to $10,000 per year from taxation. This is great, however, if returns are low due to onerous fees and expenses, would I be better placing the money elsewhere (i.e. Vanguard) pay the taxes and make some money off my princiipal? Should I mention to my Company my concern that they may not be in compliance with disclosure requirements under ERISA 404(C)? Are insurance company products not subject to the same SEC guidelines or ERISA? It seems somewhere I read this. Any advice very much appreciated before next Friday please of Geezard may be looking for a new job!!!

-- posted by geezard