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Hi. I started a new job 6 mos. ago, and the 401(k) at the new company allows me to self direct everything through Schwab for $75/year. I'd also like to roll my previous 401(k) balance to my new 401(k).

Since I can completely self direct, would you recommend doing the RP Variation with my 401(k)? I'm thinking I could go with an index fund for the years' contributions, and RP variation once a year including any contributions in the index fund. What do you think?
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>> Hi. I started a new job 6 mos. ago, and the 401(k) at the new company allows me to self direct everything through Schwab for $75/year. I'd also like to roll my previous 401(k) balance to my new 401(k).

Since I can completely self direct, would you recommend doing the RP Variation with my 401(k)?
<<

I'd say it depends on how much you have in the account.

If we assume, on average, that three stocks in the RP4 turn over, that's six trades per year -- probably $180 with Schwab assuming this account has similar $30 trades as their other accounts.

That means you're paying $255 per year to Schwab in total. With a $10,000 account, that's 2.55% per year -- on the high side but still arguably better than your plan's index fund. If you had $50,000, that cost falls to 0.51%, which (IMO) would make it definitely worthwhile. If you had $5,000, on the other hand, forget it; your expenses would be more than 5%.

The more your 401(k) portfolio is worth, the more it makes sense to self-direct them in this case. Personally, I'd say the "decision line" would be at around $10,000 given the relatively high trading costs.

Tim
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