I have noticed a couple of recent posts from others with similar questions, but mine is just different enough that I'd like to get additional advice if anyone would be so kind.My stats:- Early 30s- Racked up significant CC debt in my 20s- Now debt-free except for mortgage and a small student loan (thanks to TMF)- Have less than $10k in retirement savings; includes a fully funded Roth IRA opened in 2000- Single, no children, now in a well-paying job- Can invest ~$10k this year for retirementProblem: I am trying to decide if I should stop all or part of my contributions to my 401(k) and concentrate on a taxable account instead. Here is why:My employer's 401(k) plan is a 'group annuity contract' with an insurance/investment company. We get no employer match.The plan offers 'house brand' funds investing in other mutual funds. For example, they have the 'InvestmentCompany T. Rowe Price Blue Chip' fund, which invests in the T. Rowe Price Blue Chip Growth Fund. Each 'house brand' fund charges an annual fee that ranges from 0.6% to over 2%. There are no fees for buying/selling fund shares within the 401(k).One thing that makes me nervous is that the 'house brand' fund expenses and returns do not seem to track the underlying funds as closely as I expected. For example, if the underlying fund goes up 3%, the 'house brand' fund based on it may only show a 2% return. That difference, however, does not appear to hold across the spectrum of funds, nor within that fund from one date range to another. So, it seems that a fund that may be a good investment on its own could be a bad investment under this plan. Aargh.In addition, I do not have access to the day-to-day activity in my account (buys, sells, etc.). Statements are only available at the end of the quarter. Unlike my previous 401(k), these funds have no ticker symbols that I can plug into my portfolio tracker and know on a daily basis how the fund is doing. That makes me nervous, too.So, I am looking for advice on what I should consider when making my decision regarding a taxable account vs. this 401(k). Has anyone done a similar comparison or can advise me on how to go about it myself? I have access to the annual charges for the 'house brand' funds in the 401(k), and all of the relevant data (fees, returns, etc.) for the underlying funds. I also have the relevant data for funds that I would like to have in the taxable account. Where do I go from here?TIA!!!Mary
The "Retire Early Homepage" has a webpage called "Are you getting the shaft in your 401k?" that is an interesting discussion.http://www.geocities.com/WallStreet/8257/shaft2.htmlAlso see their Excel spreadsheet called "The 401(k) Shaft Detector"http://www.geocities.com/WallStreet/8257/401ksft.htmlyou can enter your numbers and determine if the taxable account is better.It sounds like the "house" funds charge a DAILY fee, not an annual fee, and that's why the returns don't match up during the quarter.
jrr7,Thank you SO much -- this looks like exactly what I was looking for!Mary
"It sounds like the "house" funds charge a DAILY fee, not an annual fee, and that's why the returns don't match up during the quarter. "While I'm not a fan or supporter of the way the industry is currently run, but I would like to offer another explanation for the loose tracking of the "house" funds versus the actual fund. Most of the differences I've seen can come from other members of your "house" plan moving money around within your plan. This causes fees to be assessed within the plan and may have an unexpected affect on your returns (which sucks, but is the nature of the beast).I've been shocked at the extent to which other employees actions can affect my returns within my 401(k) plan.Regards,LooseChange
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |