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Author: tleek Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75335  
Subject: 401K can (should) I subvert it? Date: 11/13/1998 9:59 AM
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My company has a 401K program with Fidelity. So I put away 15% of my income there tax-deferred each year and they add 6% to that.

I was interested in seeing if I cant have them instead put the money in a self-directed IRA and I'd distribute it amongst the Foolish Four (or another Dow beating scheme). I've been unsatisfied with the performance of the various Fidelity Funds.

Should I bother doing this? Please forgive me if this is a silly question.

But even if I knew this were the right path, I dont think there is any way I can do it! The people in Benefits say the only way they will make these contributions is through Fidelity. I suppose I *could* just put away 15% myself where I want and tell them not to deduct anything. So I'd have to do all the accounting. Yuck. But then I'd lose the 6% contribution which would be bad I'd think.

I'm frustrated and confused. Anyone been here before and have suggestions or solutions?


-Tim
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6600 of 75335
Subject: Re: 401K can (should) I subvert it? Date: 11/13/1998 1:48 PM
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Greetings, Tim, and welcome. You wrote:

<<My company has a 401K program with Fidelity. So I put away 15% of my income there tax-deferred each year and they add 6% to that.

I was interested in seeing if I cant have them instead put the money in a self-directed IRA and I'd distribute it amongst the Foolish Four (or another Dow beating scheme). I've been unsatisfied with the performance of the various Fidelity Funds.

Should I bother doing this? Please forgive me if this is a silly question.

But even if I knew this were the right path, I dont think there is any way I can do it! The people in Benefits say the only way they will make these contributions is through Fidelity. I suppose I *could* just put away 15% myself where I want and tell them not to deduct anything. So I'd have to do all the accounting. Yuck. But then I'd lose the 6% contribution which would be bad I'd think.

I'm frustrated and confused. Anyone been here before and have suggestions or solutions? >>


First, contribute to your 401k to ensure you get the full 6% company match. That's free money that represents an immediate, risk-free return on your money that is extremely hard to beat in anything else. Never turn it down.

As to getting a self-directed brokerage option within your 401k, it can be done. Most employers don't do it for liability and expense reasons. Nevertheless, if enough participants (i.e., employees) demand this option, most employers will make every effort to include it. However, it takes more than one person to convince an employer the option is worthwhile. Therefore, you will have to enlist the aid of other employees and all of you must be persistent in making the request. Otherwise, it just won't happen.

Regards….Pixy


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Author: BillEuclid Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6615 of 75335
Subject: Re: 401K can (should) I subvert it? Date: 11/15/1998 4:00 AM
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Tim, you said:
"But even if I knew this were the right path, I dont think there is any way I can do it! The people in
Benefits say the only way they will make these contributions is through Fidelity. I suppose I *could*
just put away 15% myself where I want and tell them not to deduct anything. So I'd have to do all
the accounting. Yuck. But then I'd lose the 6% contribution which would be bad I'd think. "

After you have put enough in the 401k to get the 6% match, you probably want to put $2000 in a deductible or Roth IRA so you can control it the way you described.

However, DO NOT reduce your 401k in favor of putting the money into a taxable account instead. The tax cost to you will be so much higher in that case. The only exception would be if you had substantial excess fees in the 401k, on the order of 1% MORE than what you would otherwise pay in a normal taxable account.

Bill



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