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Author: bpinvestor Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 25318  
Subject: STARTING A 401K WITHOUT MUTUAL FUNDS Date: 7/12/1999 9:59 PM
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Hi all.

Looking to start a 401K plan for our company. We are 14 people. Don't wanna have to be at the mercy of using mutual funds - at least not entirely. Would like to have the option to additionally purchase individual stocks at everyone's discretion. Of course, if one wants to remain with mutual funds, that's OK too. All the actuarial firms we've consulted with always offer mutual funds and that's about it. Is it possible to start a plan with this amount of people offering individual stocks instead of or in combination with mutual funds? Would greatly appreciate anyone with knowledge on this topic to share their thoughts. Much obliged.....
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Author: Mailman9 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2856 of 25318
Subject: Re: STARTING A 401K WITHOUT MUTUAL FUNDS Date: 7/13/1999 10:37 AM
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All the actuarial firms we've consulted with always offer mutual funds and that's about it. Is it possible to start a plan with this amount of people offering individual stocks instead of or in combination with mutual funds? <<<<<<<<

Talk to a brokerage firm. I am sure they'll want to offer individual equities as well as mutual funds. I think they are generally more expensive though. Not totally unexpected because the recordkeeping will be a bear with what you are talking about.

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Author: PizaBagl One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2857 of 25318
Subject: Re: STARTING A 401K WITHOUT MUTUAL FUNDS Date: 7/13/1999 11:49 AM
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Currently, all of the 401(k) Record-Keepers will offer some selection of Mutual Funds, Money Markets, and/or Variable Annuities, and some will provide the ability to offer your own Company Stock in the Plan.

All of the larger Record-Keepers have spent the past year installing systems to provide Plan Participants with a Self-Directed Account option which will allow the participant to perform daily trades of any securities using their pre-tax 401(k) dollars. Most of these providers (i.e. Merrill, Fidelity, Citi, Pru) have promised to turn on these features during 1999-2000, though I am not sure if any have done so yet. I know that this option is currently on the market for IRA participants, but I believe that most of the 401(k) providers have yet to work all the kinks out of the systems yet.

Personally, I believe that giving people the ability to perform daily trades on equities within their 401(k) is ludicrous. After all, this is supposed to be retirement money, not play money......That's just my opinion, though. :-) Fool On.

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Author: paulbort One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2859 of 25318
Subject: Re: STARTING A 401K WITHOUT MUTUAL FUNDS Date: 7/13/1999 1:31 PM
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Personally, I believe that giving people the ability to perform daily trades on equities within their 401(k) is ludicrous. After all, this is supposed to be retirement money, not play money......That's just my opinion, though.

PizaBagl,

I would like to respectfully disagree. I would find this feature very useful, as I could then move my 401(k) to the RP4. I agree that this would provide an opportunity for mayhem, but Darwin promised us survival of the fittest. (or was that survival of the foolish? ;-)


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Author: PizaBagl One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2860 of 25318
Subject: Re: STARTING A 401K WITHOUT MUTUAL FUNDS Date: 7/13/1999 2:04 PM
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Hi Paulbort,

I definitely see your point in terms of the benefits, however, I look long term and see all sorts of issues with these new options available to the retirement investor.

It is really only within the past couple of years that the 401(k) Plan has really started to gain popularity among the general populace; even the IRS changed its rules to allow certain Healthcare organizations to offer 401(k)'s when they previously had access to only 403(b) plans.

Currently, the industry is buckling down for what is anticipated to happen in about 11-12 years, when the majority of the baby boomers start to bring the Record-Keepers into litigation. This is because so many investors were only given the option to keep their money in the GIC for many years. Once these folks realize that they do not have enough money in their plans for retirement, they will sue.

What point am I trying to make? I believe that the 401(k) Self-Directed Investment Option will provoke the opposite situation with the same results. In other words, people will have so much leighway to monkey with their investments that they will end up hurting themselves inadvertently. There was a great article put out this year that discussed the trend people are making toward destroying their retirement savings...I wish I could find it....

I guess that I am a firm believer in two things:
1. The government did a great thing when it provided the facility to offer 401(k) style plans, and for us to waiver from the original model too much can be dangerous. The original statutes offered much more protection for the individual's own good than many would like to believe.

2. What we know about the market is still fairly limited, esp. in terms of performance over time. I think it is too soon for such progress in this area.

Peace Out. Rock On. Kick Arse.

PizaBagl

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Author: bpinvestor Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2862 of 25318
Subject: Re: STARTING A 401K WITHOUT MUTUAL FUNDS Date: 7/13/1999 2:10 PM
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Personally, I believe that giving people the ability to perform daily trades on equities within their 401(k) is ludicrous. After all, this is supposed to be retirement money, not play money......That's just my opinion, though.

PizaBagl,

I would like to respectfully disagree. I would find this feature very useful, as I could then move my 401(k) to the RP4. I agree that this would provide an opportunity for mayhem, but Darwin promised us survival of the fittest. (or was that survival of the foolish? ;-)


FROM BP INVESTOR:
Thanks for both of your replies. What I had in mind was more along the lines of what Paulbort has described. I don't want our employees to be fixated on "day trading" their retirement money. I just prefer to offer a Foolish approach to investing IN ADDITION to a mutual fund, preferably an index fund. For me, I prefer individual stocks and I do not like not having an option aside from a mutual fund as regards to where I can invest my money. All of the companies we've spoken with are only pushing mutual funds. If anyone can let me in on a company which can manage what I'm looking for, I'd be most appreciative.

bpinvestor

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Author: PizaBagl One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2863 of 25318
Subject: Re: STARTING A 401K WITHOUT MUTUAL FUNDS Date: 7/13/1999 2:19 PM
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I think Fidelity and/or Merrill can do what you want right now, if not very soon. Good luck!

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Author: x4a54 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2864 of 25318
Subject: Re: STARTING A 401K WITHOUT MUTUAL FUNDS Date: 7/13/1999 2:25 PM
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i've been told by our HR that MerrillLynch will
allow self-directed 401(k) only IF total investment is
high enough (i vaguely recall she said $10mln)


jp

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Author: PizaBagl One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2866 of 25318
Subject: Re: STARTING A 401K WITHOUT MUTUAL FUNDS Date: 7/13/1999 2:52 PM
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Like I said in my earlier post, I do not know of any firms that have rolled it out yet, though it is coming. Once they are prepared to offer this option to their entire participant base, I am sure they will not have a $10 mil entry fee, esp. considering not many folks have that much money within their 401(k).


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Author: x4a54 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2867 of 25318
Subject: Re: STARTING A 401K WITHOUT MUTUAL FUNDS Date: 7/13/1999 3:17 PM
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btw, the 10mill is for the entire company, there was
a lower, relatively reasonable amount for individuals.

i think we agree that at some point, the marketability
of the concept will override whatever concerns exist,
and they'll offer it to everyone, probably without
limits.

jp

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Author: Mailman9 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2870 of 25318
Subject: Re: STARTING A 401K WITHOUT MUTUAL FUNDS Date: 7/13/1999 6:15 PM
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I know there are recordkeeping firms that will do this already. We have taken over the recordkeeping from one of our subsidiaries where the recordkeeping firm permitted self-directed accounts. I don't remember the name of the firm but it is located in Hartford CT.

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