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Author: notseen Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76398  
Subject: Changing jobs, what to do with 401K? Date: 7/9/2007 6:16 PM
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I don't post often but last time I did I got tons of great responses so I thought I would try again.

I am about to change jobs and I am faced with a decision to make regarding my 401K.

I could leave it where it is but no longer be able to contribute to it - it would still grow as it is but obviously I would do better if I could contribute to it.

I could leave it where it is and wait until I am eligible for my new employer's 401K and roll it over into it. This could take up to a year.

I could open a Traditional IRA and roll it over into it immediately and manage it on my own - I have been doing quite well with my own portfolio and my Roth IRA over the years.

I could open a Traditional IRA and roll it over into it and if/when I become eligible for my employer's 401K I could roll it over into it at that time.

So I have a few options here. Confusing the matter I also have a Roth IRA. If I open a Traditional IRA does this mean my maximum contribution between the two accounts is $4000 or is it $4000 each?

At the moment, I think I should open a traditional IRA and roll it over into it. That's what my gut tells me. Are there any other options?
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Author: wrjohnston91283 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58233 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/9/2007 6:40 PM
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So I have a few options here. Confusing the matter I also have a Roth IRA. If I open a Traditional IRA does this mean my maximum contribution between the two accounts is $4000 or is it $4000 each?

$4000 total

I would roll over to a traditional IRA, and maybe convert to a Roth over the next few years (if large enough).

WRJ

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Author: Hohum77 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58234 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/9/2007 6:53 PM
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So I have a few options here. Confusing the matter I also have a Roth IRA. If I open a Traditional IRA does this mean my maximum contribution between the two accounts is $4000 or is it $4000 each?

each year Sum total for however many accounts you have (2, 3, etc.)

2007 $4000 ($5000 if over 50)
2008 $5000 ($6000 if over 50)




Hohum


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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58235 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/9/2007 7:10 PM
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So I have a few options here. Confusing the matter I also have a Roth IRA. If I open a Traditional IRA does this mean my maximum contribution between the two accounts is $4000 or is it $4000 each?

The combined contribution limit for each individual is $4000 ($5000 if 50 or older) for all IRAs. However, rollovers do not count toward the contribution limit.

Also, if you make a contribution to a rollover IRA, some employers may no longer accept the money back into a 401(k), depending on the rules that they have set in their plan. They are allowed to by the IRS, but they are not required to.

At the moment, I think I should open a traditional IRA and roll it over into it. That's what my gut tells me. Are there any other options?

You've pretty much outlined the options. A couple things to be aware of with leaving it in your old plan:

- If you have less than $5000 in your old 401(k), the employer may force you out of the former plan
- If you leave your money in your former plan, your former employer may start charging you additional fees

Plus, you have more choices of investments and have more control over the costs associated with the investments in a rollover IRA. So, rolling it over into an IRA is generally preferable, unless you have investments that you can't replicate elsewhere, like a mutual fund that's closed to new investors.

AJ


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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58236 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/9/2007 9:50 PM
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I would roll over to a traditional IRA, and maybe convert to a Roth over the next few years (if large enough).

This is a bit too simplistic. Really, we don't have enough information.

The key question is, can you get better/cheaper/better performing investments in an IRA you open up compared to your choices in your 401K? If so, do it. If not, then keep your money in the 401K.

Likewise, how does your new employer's 401K compare? The goal should be to leave your money where the funds are the best choices and lowest expenses. Whether its the new 401K, the old one, or an IRA isn't really important.

I'm leaving my job soon, but my current employer is a big company that uses its bulk purchasing power to get us into retirements classes of some funds that have low expense ratios and no loads, so I am seriously considering leaving it with them, since I have access to things there that I don't anywhere else.

Dont worry about the labeling, worry about the fund choices and other fees.

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58241 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/10/2007 10:05 AM
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I'm leaving my job soon, but my current employer is a big company that uses its bulk purchasing power to get us into retirements classes of some funds that have low expense ratios and no loads, so I am seriously considering leaving it with them, since I have access to things there that I don't anywhere else.
------------------------------------------------------------------------

You bring up a good point, however it is doubtful a 401K plan would have options with expense ratios as low as Vanguard-particularly Vanguard's ETFs.

Also with all 401K plans there are costs that the participants never see but you can bet it is deducted from your return.

Plus with an IRA there is more flexibility regarding post-mortem death distributions than with a 401K.

buzman

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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58244 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/10/2007 2:46 PM
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You bring up a good point, however it is doubtful a 401K plan would have options with expense ratios as low as Vanguard-particularly Vanguard's ETFs.

My current 401K has an EAFE index fund for 0.15% and no load. And an S&P 500 index fund for 0.10%. It also has a small/mid foreign actively managed fund for very low expense, which is not a fund category that Vanguard even has as far as I've seen (they have emerging, but not small in developed markets). I also have access a consistently high performing micro-cap fund that, while, not cheap, has routinely exceeded most small/micro indexes. I get it without a load and lower expense and also the fund is closed to new purchases so I wouldn't be able to get it elsewhere.

There are companies that use their size and 'group' purchasing options as a way to work special deals on the funds for their employees.

Vanguard is a great choice, but sometimes your 401K may have options that its worth keeping access to. All I'm saying is that's the question to ask.

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58245 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/10/2007 4:46 PM
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Good for you.

All I am saying is there are costs involved in 401K plan and that participants never see but are charged for.

buzman

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Author: notseen Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58246 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/10/2007 4:50 PM
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Thanks for the great feedback all.

Here is some more info which may help.

I am 39 years old. I have been with my current company for 11 great years and I am leaving it to pursue a terrific opportunity with another great company. My 401K has 160K in it - fully vested. They had been matching 5%. My Roth IRA has 7K.

I am originally from Canada which has slowed down my retirement planning somewhat as I have 4 retirement accounts now due to all of the countries I have worked in and subjected to various rules.

I also have an international retirement plan with my current employer worth about 10K (which I cannot touch) and a retirement plan in Canada worth about 15K which I cannot contribute to.

My personal stock portfolio is about 20K and has been making about 20% over the past few years. I got lucky and am long on MA and DLB. Got in MA at 54.

My current salary is 96K, my new salary is 126K. My wife is currently unemployed but is looking for new work - she is a lawyer. When she does work we tend to have lots of disposable income. If she works we will likely be making over 200K. So income taxes are an issue.

My goal is to accumulate as much money as possible to retire as soon as possible. We live rather frugally (as much as possible in CA) and I think if I can accumulate around 1.8 Million that should be enough for me to live on. Our current expenses (incl. mortgage) are about 48K per year. Once retired we expect to leave CA and have much lower expenses as well.

So the funds available in my current 401K are not earth shattering. I have made around 10% per year and have been in the plan for as long as I have been allowed which is about 6-7 years.

It sounds like my best option is to open a traditional IRA and roll over my 401K into it. I believe I could self direct it and make more than 10% a year. But my two big areas of concern are the $4,000 yearly limit ($5,000 next year) and the $160K income limit (married, filing jointly). So I would then have a decent size (for me anyways) traditional IRA and a smallish Roth IRA.

Would it be worth it in the longer term to roll my upcoming new traditional IRA back into an employer's 401K to take advantage of the 15,000 I could put away? Or would I be better off to likely earn higher returns in my own IRA but be limited to only put in 5K per year?

And what should I do about my Roth IRA? Just ignore it and concentrate my funds in my new traditional IRA? Or should I plan on one day consolidating all of my funds into my Roth IRA? If my new company offers a Roth 401K should I think about moving my funds into my Roth IRA and then into the Roth 401K?

Argh...so many options/questions....anyone have an opinion?



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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58247 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/10/2007 5:12 PM
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>> All I am saying is there are costs involved in 401K plan and that participants never see but are charged for. <<

I don't doubt that, but how are these fees charged?

For example, my 401K's administrator is Fidelity. It uses the same funds that non-401Ks would use with the same tickers and the same reported NAVs. The value of my portfolio is based off of these NAVs. And there is no regular maintenance fee, so I don't understand what other fees there are for me that are reducing return.

#29

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58248 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/10/2007 5:12 PM
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It looks to me like that y'all make way too much money for a Roth and are also ineligible for deductible contribution to a TIRA.

I am still not a big fan of non-deductible IRAs but given your Age you may want to look at that.

Are Roth options available for your company 401K?


All the options you have I would suggest a fee-only financial planner.

www.napfa.org
www.garrettplanningnetwork.com

buzman

membership disclosure.

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58249 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/10/2007 5:21 PM
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I don't doubt that, but how are these fees charged?

------------------------------------------------------------------------

You can doubt it all you like.

There are third party administator fees, for instance and other marketing costs. If you believe Fidelity does it for nothing then I have bridge to sell you in Brooklyn.



http://www.401khelpcenter.com/401k/meigs_401k_fee_testimony.html

Congressional Testimony on 401k Fees

On March 6, 2007, the U.S. House Education and Labor Committee, chaired by Rep. George Miller (D-CA), held hearings on "Hidden 401k Fees Undermining Retirement Security?"

"Today, because of weak disclosure rules, most workers don't even know how much they are paying in fees," said Chairman George Miller.

I should note that these hearings only took place after Democratic party took control of the House.

buzman



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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58250 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/10/2007 5:24 PM
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A few comments;

1) If you have any company stock in your 401K there could be special considerations. Ask about this if this is case.

2) You are in your peak earning years and in a high tax area. Even if you can convert to a Roth it is hard to see how it would make sense now compared to when you might have lower taxable income in retirement and live in a state with a lower tax rate. Being in a high income tax state and retiring elsewhere, really makes a Roth less favorable.

3) Since you sound a bit overwhelmed, I had to say it, but there is another option to look at which is to invest some of your retirement money in stock in a regular taxable account. Currently the capital gains tax rates are lower and they will go to you estate at a stepped of tax bases. Of course there is no telling what the tax laws will be decades from now but a variety of investment types will give you more flexibility. This would also help fund an early retirement before the normal withdrawal ages.

4) You are at an income level where it would make sense to use a fee only(by the hour) financial advisor to come up with a plan and review it once or twice a year.

Greg


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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58251 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/10/2007 5:31 PM
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It sounds like my best option is to open a traditional IRA and roll over my 401K into it. I believe I could self direct it and make more than 10% a year. But my two big areas of concern are the $4,000 yearly limit ($5,000 next year) and the $160K income limit (married, filing jointly). So I would then have a decent size (for me anyways) traditional IRA and a smallish Roth IRA.

Would it be worth it in the longer term to roll my upcoming new traditional IRA back into an employer's 401K to take advantage of the 15,000 I could put away? Or would I be better off to likely earn higher returns in my own IRA but be limited to only put in 5K per year?


I think you have something wrong here.

You can have both a 401k AND a traditional IRA AND a Roth IRA. All at the same time.

You can contribute to both the 401k AND one (or both) of the IRAs at the same time.

These are not mutually exclusive.

The rollover from your 401k to a traditional IRA has no income restrictions on it. You can do that no matter how much or how little you make. And this rollover does not affect your ability to make additional contributions to either another 401k plan or an IRA.

And if your new employer has a 401k plan, you can contribute to that plan even if you roll your old employer's 401k money into an IRA.

You have a lot more freedom here than I think you realize.

--Peter

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Author: hockeypop Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58252 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/10/2007 5:43 PM
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Congratulations! My opinions in no particular order:

1. If you haven't you should look into the asset allocation discussions here and elsewhere. it will be critically important for you to understand how you are investing your entire package.

1a. If you don't use Quicken or Money you should begin something that will help you keep track of all those accounts.

2. I suppose you've gotten the advice about emergency funds, college funds for kids, etc. especially with the new job?

3. If you haven't I'd spend some time at intercst's Retire Early website (not a part of TMF). It's a goldmine of information especially if you want to retire early: http://www.retireearlyhomepage.com/

4. Yes roll your 401k into an IRA. Unless your 401k is a great place it's probably easier to start with whatever company you think is best.

5. Fund your Roth IRA to its max if you still can with the income limits for 2007. You for sure will be above the limits in 2008.

6. You're a better stock picker than I am. I stick with mutual funds that are well allocated and most often with index funds. Making between 10-20 percent per year foward may be optimistic and/or risky.

7. I think making $126k with a wife/lawyer working you'll have a difficult time in California sticking to $48k expenses per year. Unless you're extremely disciplined and/or used to living someplace that has that much lower a standard of living, you'll need more than $1.8 million.

Great start so far.

Hockeypop

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Author: IndecisiveFool Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58254 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/10/2007 6:40 PM
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You can doubt it all you like.

There are third party administator fees, for instance and other marketing costs. If you believe Fidelity does it for nothing then I have bridge to sell you in Brooklyn.


You didn't answer ziggy's question. You just repeated the hidden charge advice. I would ask the same thing as ziggy. If the ticker symbols are identical, the fees in the prospectuses are identical, and there are no administration fees tacked onto your account by your employer on a monthly or annual basis, where do you find these hidden fees?

Without reviewing all the testimony of the congressional hearing, I would guess this occurs with 401ks that have funds that are not found in the Sunday business section. Just to make up an example. Your 500 index fund is VFINXX instead of VFINX. When you review the fee structure, VFINXX has higher fees than VFINX. I once had a 401k administered by a big bank that would do this.

My wife's 401k is administered by Vanguard, has the same tickers and has no outright annual charges from the employer for offering the 401k. There is no difference in expense ratios between the fund in the 401k and the fund that anyone can buy in a taxable account. There shouldn't be any difference since they're the same mutual fund. Therefore, I assume the Vanguard's adminstration fee for the 401k is paid by the employer. Ultimately it's paid by the employees through lower wages and/or lower matching funds.

IF

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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58255 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/10/2007 8:18 PM
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>> You can doubt it all you like. <<

I already said I *didn't* doubt it. Do you automatically assume every single response to you is in disagreement? Seems like it.

>> There are third party administator fees, for instance and other marketing costs. If you believe Fidelity does it for nothing then I have bridge to sell you in Brooklyn. <<

Of course they get paid. For one thing, there's the expenses of the fund. And if there's more than that -- and I'll take you at your word -- where are they? How are they hidden?

#29

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58264 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/11/2007 10:25 AM
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is no difference in expense ratios between the fund in the 401k and the fund that anyone can buy in a taxable account. There shouldn't be any difference since they're the same mutual fund. Therefore, I assume the Vanguard's adminstration fee for the 401k is paid by the employer.
-----------------------------------------------------------------------

Maybe the employer picked it up or maybe not.

My point is there are no way to tell who pays what since the TPA/other fees are not disclosed.

The idea that a 401K platform is some benevolent gift to workers is misguided.

"The typical 401K plan is an absurdly expensive vehicle with fees approaching 3%." Dr. William Bernstein.

For most people the better option is to roll an 401K plan into an IRA (unless there is company stock).

1. IRAs almost always have a lower cost structure.
2. Post-morterm distributions are flexible with IRAs for isntance,some 401K plans only allow lump-sum distributions, ouch.

buzman




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Author: IndecisiveFool Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58265 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/11/2007 11:01 AM
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My point is there are no way to tell who pays what since the TPA/other fees are not disclosed.

Neither ziggy nor I disagree with you that there could be hidden fees in some 401k plans. You seem to imply that they are in all plans. Since you're the financial planning guru that posts the Garrett network all the time, maybe you can enlighten us more than a few snippets from a congressional hearing and some hand waving.

Suppose I move to a new employer and start a 401k plan with a $1000 investment in fund ABC. I invest an identical amount in fund ABC in a new taxable account at the same time. The return for the year on the invest is 10%. Both accounts have $1100 in them. Where are the hidden fees?

I've already posted that I've had a previous 401k where the mutual funds available were only available through the 401k. I couldn't buy them on the open market. In that case, I could see someone calling it hidden fees since the expenses may be higher.

But in the case where a 401k uses readily available mutual funds on the open market and does not charge a maintenance fee, where is the 401k plan hiding the fees?

IF


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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58268 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/11/2007 11:59 AM
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If Dr. William Bernstein and a congressional hearing are handwaving then I'm guilty.

I'm sorry I can't prove where something is hidden. Otherwise it wouldn't be hidden. Sheesh.

The original poster asked for advice re: 401K rollovers. My advice that most plans have hidden costs.Congratulations are in order if your plan doesn't.

Even more important is the flexibility that IRAs have versus 401K plans regarding distributions due to death of participant.

People often have the beneficiaries screwed up rolling it over gives you a chance to fix it.

Here's a link.

http://www.401khelpcenter.com/cw/cw_planfees.html

Best wishes,

buzman


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Author: IndecisiveFool Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58270 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/11/2007 12:43 PM
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I'm sorry I can't prove where something is hidden. Otherwise it wouldn't be hidden. Sheesh.

I was assuming a hearing on hidden fees meant the fees were uncovered and now known. I assumed that your occuption meant that you had more insight into the situation since you were more likely to keep updated in your field of expertise.

Instead we got...

ziggy: Where are they hidden?

buzman: They're hidden.

IF: Show me where they're hidden.

buzman: They're hidden.

ziggy: Explain where they're hidden.

buzman: They're hidden.

IF: Indicate to me where they are hidden.

buzman: They're hidden.

You just kept saying they're hidden. Hidden means to me that the average 401k account holder doesn't know the fees are there. It doesn't mean to me that the financial gurus don't know they're there. I think you don't know where they are since you don't seem to want to give any examples of a hidden fee.

IF

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58280 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/11/2007 6:22 PM
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Was the link I listed not active?

You want an example? Okey dokey

Here's is a 40 page report.

I don't feel like reading the whole thing for you.

http://www.401khelpcenter.com/pdf/mdh_understanding_fees_v2.pdf

From the abstract:

"Not even the Federal Government fully grasps the issue. (or posters at the TMF)
Understanding how hidden fees came about, and recognizing the specific types and
amounts of such fees, will help employers make better decisions regarding 401(k)
services. That understanding will help create a more secure retirement for American workers."

An example which I gave several times were TPA costs. Did you not get that? You asked for an example and that is prime example.

But I guess my answer was hidden. (grin)

I don't think Vanguard does TPA in-house. Either your wife's company pays for the cost or it comes from her return. If she has a good boss who hooks her up then I am happy for you. Congratulations on your good fortune!


As for me I am going to the beach. How about you?

Best wishes,

buzman



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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58281 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/11/2007 6:36 PM
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This is "low-cost" option

Spread costs .51%
Trading costs (buying/selling underlying securities
within funds)
The .35% example used is generously low. Two industry
experts have publicly stated that trading costs are closer to
equaling the fund management fee. In other words, “The average
expense ratio would double if the funds disclosed trading costs.”26
this example, the trading costs would be 1.13%, and the total
expense would increase to 3.77%. Even this appears to still
the “low” side over total 401(k) fees.)
.35%
Fund management fees/costs
(including embedded revenue sharing if any) 1.13%
Custodial fees .05%
Investment advisor & participant education fees .75%
Administration fees charged to plan .15%
CPA audit and legal fees charged to plan .05%
Total annual charge to plan assets 2.99%


-----------------------------------------------------------------------

OK?

And this is the cheap side. This was too good to pass up.
Most 401K plans have a lot of fees that participants do not see and that is why rolling a 401K plan to an IRA makes sense (among other reasons).
buzman Now I am splitting.

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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58293 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/13/2007 12:56 AM
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Spread costs and trading costs are part of any fund, whether in a 401K or not. They are very hard to measure (and impossible to do so with certainty), but there's nothing 401K specific about them, they're how funds work.

The others are fees that some may indeed charge, and some may do so incredibly sneakily, but they are by no means a given.


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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58320 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/16/2007 8:36 AM
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I'm leaving my job soon, but my current employer is a big company that uses its bulk purchasing power to get us into retirements classes of some funds that have low expense ratios and no loads, so I am seriously considering leaving it with them, since I have access to things there that I don't anywhere else.

I'm in the same situation. I left my job at the end of June, but I am not in a hurry to move my money. My old 401k plan had access to some of the Institutional shares from Vanguard; if I move the money, it will fall back to the Admiral level...

Acme

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58321 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/16/2007 8:43 AM
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You bring up a good point, however it is doubtful a 401K plan would have options with expense ratios as low as Vanguard-particularly Vanguard's ETFs.

My former company's plan certainly does. I had a lot of money in VINIX (Vanguard's S&P500 index Institutional shares) which has an expense ratio of 0.05%. This was one example of where their purchasing power gave me access to a fund that I would never have on my own.



Also with all 401K plans there are costs that the participants never see but you can bet it is deducted from your return.

Maybe this is true some (maybe even most) places. But it is definitely not universally true. It certainly was not the case with my former company; and they have assured me that I will not be paying any fees now either.



Plus with an IRA there is more flexibility regarding post-mortem death distributions than with a 401K.

Very true. Another big (and underrated) advantage of an IRA over a former employer's 401k is that you do not have to worry that they will change the provider and lock you into a "dead period" when you need to make changes to your allocation or make withdrawals.

Acme

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58322 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/16/2007 8:54 AM
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And this is the cheap side. This was too good to pass up.
Most 401K plans have a lot of fees that participants do not see and that is why rolling a 401K plan to an IRA makes sense (among other reasons).


You have now gone from ALL to MOST. This is a dramatic change.

Certainly, all 401k plans have fees that go beyond the fund expenses. However, not all of them pass these fees along to the participants. Some plans have large enough asset bases that the 401k administrator picks up the fees to keep the business.

Acme

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58323 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/16/2007 10:12 AM
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Also with all 401K plans there are costs that the participants never see but you can bet it is deducted from your return. WROTE buzman

Maybe this is true some (maybe even most) places. But it is definitely not universally true. It certainly was not the case with my former company; and they have assured me that I will not be paying any fees now either WROTE Acme
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Congrats on your good fortune.

It is very rare to have a employer pick up the costs of a plan and very rare for an employer to choose Vanguard.

Don't worry about the lottery, you won't the Daily Double.

401k plans should be requried to disclose their costs and whether or not the participants are paying them.

buzman

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58324 of 76398
Subject: Re: Changing jobs, what to do with 401K? Date: 7/16/2007 10:16 AM
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Don't worry about the lottery, you won't the Daily Double.

Grammar check: Won the Daily Double

buzman



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