No. of Recommendations: 0

I hope you can calm me, or at least direct me, because I'm furious.

Here is the situation:

My company recently decided to move our 401k plan provider from Charles Schwab mostly because people were not investing in funds due to the fact that you could not just set up a % for each contribution to go to different funds. For example, you couldn't say I want 25% to go to an index fund, 75% to a EuroPacific fund.

We also had the option for 4 years + to trade stocks in our 401k. As such I settled over the past 4 years on a dividend reinvestment strategy which allows me to buy and hold 8-10 major dividend paying company stocks, and automatically reinvest the dividends. This has proven VERY valuable as I've gotten a nice bump up in my value from the dividends and have had very few transaction fees since the dividends are automatically re-invested. Now...I don't have hundreds of shares of these companies, but each on has let me add fractional shares so for example I ended up with 32.35 shares of Microsoft after the last quarterly dividend.

So far so good.

So, we switched. Here is what happened. We got rid of Schwab. We went to 401ktrax which lets you purchase 10 different mutual funds. There is no stock trading. For those of us who traded stocks in our 401k we had the following options:

1. Sell our stocks and invest only in mutual funds. We pay for the transaction fees (about $300 for me)

2. Transfer in kind to Ameritrade and pay a $300 yearly fee to continue trading.

I chose option 2 figuring that I don't want to change my long term investment plan.

Well. Turns out that Ameritrade has some serious deficiencies with their corporate services. None of which were made clear to me when I had to make the choice above.

1. I cannot hold fractional shares with Ameritrade as I could with Schwab. This means that for every stock where I had fractional shares, they got liqudiated during the transfer in kind (the fractional shares were liquidated).

2. This also means that unless I hold enough stock in any one company so that the dividend each quarter is equal to one full share of stock, I cannot do dividend reinvestment because Ameritrade won't purchase that stock for me. For example, if I have General Dynamics, and they pay a $12 dividend to me...that dividend will be cash only, not drip reinvested in GD...because it isnt' enough to buy one full share. This means I have to purchase 4-5 times the stock shares for each company I currently hold to get dividend reinvestment..AND...i can't have fractional shares only SOME of the dividend will be going into the stock. The rest to cash. NOT a good foolish strategy.

3. The result here is that if the dividends all go to cash, I have to wait until I have enough to buy one more share of a particular stock, and THEN have to pay a transaction fee to purchase it. NOT FOOLISH. Otherwise I have to wait until I have a larger sum of money to purchase more stock to ensure that the Transaction fee is a much lower (more foolish) percentage of the transaction. Here I lose because I am not getting the increasing dividends provided by as standard div reinvestment strategy.

4. All that being said...I STILL CAN'T do dividend reinvestment, because most of the stocks I hold are not on Ameritrade corporate services list for dividend reinvestment. I don't hold some bizarre stocks, I have very solid, large, standard companies. GD, G, MSFT, etc.

These are the stocks that I do dividend reinvestment in. The are long term plays for me with a very foolish (in my opinion) strategy for my 401k.

401ktrax, the new provider of our 401k program says that Ameritrade is the ONLY stock trading company we are allowed to use for our 401k.

Seems to me that my company has effectively FORCED me into abandoning my 401k strategy and adopting a lame "buy mutual funds selected by the company" strategy. I will not rely on someone in my company selecting mutual funds for me. I barely trust mutual fund management companies as it is.

What can I do? I feel so angry that I'm considering stopping all contributions to my 401k and just putting it all in a roth IRA or something. Not foolish...I dont' think...

Help, I need some talking down from the ledge!!

Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.