Friday, August 15, 2008

Do you have 401k?

Most of us who work for a salary have (or should have) 401k's. Now, obviously, the old advise was to contribute to it as much as you can. And I think it's still a valid advise. The problem I always had with my 401k is that is so overpriced. Even index mutual funds in it had an expense ratio of at least 0.25%, while the same can be had for 0.17% if you would go to, say, Vanguard. Oh well, I thought, that's a price of having a 401k with the 401k provider (which is one of the bigger ones, too).
However, recently several big players started offering( gulp..) ETF-based 401k. ShareBuilder, for example (which merged with ING not long ago). With ETF-based 401k potential savings on expense ratios, 12b-1 fees etc. etc. are just mind-boggling.
So if switching from traditional mutual fund-based 401k provider to ETF-based one is a possibility, I would grab it!

4 comments:

ShirleyMMueller@MyMoneyMD.com said...

Docblogger, Your 401K is very likely overpriced. Matthew Hutcheson, an expert in 401Ks, says that 90% or more of 401K plans in the United States are paying 3-3.5% in fees, much of it hidden. These expenses drag down any upward performance of 401K returns, so the participant receives less at retirement. An excess charge of just 1% over 20-25 years will diminish the final dollars retires receive by an astonishingly 20%.

As a financial educator, I've tried to clarify what the fees are and how to attack them. Please see my booklet regarding same (401K Solutions: Ready Answers) and some information in the achieves on my website as well (MyMoneyMD.com).

Docblogger said...

Dear Shirley,
I can't agree with you more on those 401k fees!
There are ETF-based 401k options available from several providers, although they are not as widely known yet

Marjorie J. said...

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Payday Loan Online said...

I would have done anything within my power not get a 401k.

Why?

Because it is the biggest ponzi scheme ever to be know in history.The difference is that 401k is backed by government while others are not.