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Financial Planning / Foolish 401(k)s


Subject:  Re: NEED HELP--401k fees Date:  11/26/2012  2:10 PM
Author:  joelcorley Number:  24950 of 26316


You wrote, I set up my investment portfolio online with Personal Capital, got the link and name from an article on portfolio management in RYR article, has anyone else used this site to verify their fund costs and what the overall expenses in funds are? I am getting beat up with high cost 401k funds and am trying to decide what to change to reduce costs, my 401k average cost is 1.35 and my wifes 401k is .88, any thoughts would be appreciated

From what I see, Personal Capital looks a lot like; but it seems to up-sell things like advisory services. Mint up-sells things like targeted advertising of financial products, so the offerings are somewhat similar.

I can't get any details on the Personal Capital 401k offering unless I sign up; but 401ks are only offered by employers. Employees cannot simply move a 401k from one place to another - your 401k is captive, which is why some financial services firms are able to charge such outrageously high fees. That and they sell them to employers as a way to pass the cost of 401k administration on to the employee.

More than likely the Personal Capital 401k is for a niche market - the small company / self-employed market. If you run your own business, you can choose to open a 401k wherever you want. Also many mutual fund companies and discount brokers offer solo 401ks that have few to no fees added.

So if you are eligible for this product, you should do more research into what offerings are available. For instance, if you want ultra low fees, open your 401k with Vanguard. They focus on index funds and have some of the lowest expense ratios in the business. Other companies such as Fidelity, TD Ameritrade and E*Trade among others offer similar products.

If you are stuck with your employer's plan, your employer's plan should be publishing their individual fund expenses. Select funds that are low cost - such as a market index fund. If expenses are still high, consider maximizing any IRA contributions before you max out your 401k contributions. (But contribute at least enough to get any employer match.) This way you can at least control some of your retirement plan expenses.

- Joel
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