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Old 01-11-2016, 08:03 PM   #1
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Relatively new to the forum: The New 401 k Argument

We are about 10 years out from retirement. Been through a lot of ups and downs. Trying to hold to the long term dollar cost averaging mantra. Have been invested through vanguard for most of our professional careers. Now I read this article about the lawsuits on the expensive costs of vanguard 401ks and the fiduciary aspects. All this time I thought we were golden by being a vanguard member. Where else can you park your retirement funds if vanguard is too high? Is vanguard too high?
In this article they used jack bogles quote against him..."over time even seemingly small differences in fees and performance can result in vast differences in the amount of savings available at retirement."
The article can be found at
News.morningstar.com/articlenet/article.aspx?id=735492


--ZG
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Old 01-11-2016, 08:08 PM   #2
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Looks like you've misidentified the culprit in the article. It appears the issue isn't actually with Vanguard, but with the plan administrators:

Quote:
(Note: While the lawsuit focuses on the costs of Vanguard funds, Vanguard itself is not a defendant. The suit instead targets the plan sponsor, including the pension committee and Anthem’s Board of Directors.)
Furthermore:

Quote:
Effectively, the accusation demands that any 401(k) plan that is large enough to warrant a separately managed account, insist that such an account be created and substituted for an otherwise identical mutual fund. Even if the fund is institutionally priced — even if it is the single lowest-cost mutual fund for its type, among the entire fund universe — the 401(k) plan sponsor is culpable if it does not pursue a cheaper option.
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Old 01-11-2016, 08:11 PM   #3
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I am not sure that they are accusing Vanguard of having high fees. I agree with you that Vanguard is known for having low fees, although they may no longer have the very lowest as they once did. If you go to their website, you can verify what their current fees are. I think you will find that they are still pretty good.
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Old 01-11-2016, 08:15 PM   #4
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Quote:
Originally Posted by REWahoo View Post
Looks like you've misidentified the culprit in the article. It appears the issue isn't actually with Vanguard, but with the plan administrators:



Furthermore:
+1.

I'd seen that article and that's how I took it, 401k plan administrators.
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Old 01-11-2016, 08:19 PM   #5
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As others have noted--the suit's major points are that the plan administrator didn't choose the already available lower-cost Vanguard's funds, and that they failed to try to get the fees cut lower still.

The OP is right in his initial belief that Vanguard offers very good funds at some of the lowest fees in the business. The Morningstar headline is not the best, but the article makes the issue pretty clear.
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Old 01-11-2016, 10:58 PM   #6
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As others have noted--the suit's major points are that the plan administrator didn't choose the already available lower-cost Vanguard's funds, and that they failed to try to get the fees cut lower still.

The OP is right in his initial belief that Vanguard offers very good funds at some of the lowest fees in the business. The Morningstar headline is not the best, but the article makes the issue pretty clear.
To take the 500 equivalent at the lowest cost there is the Institutional Index fund plus but the 401k plan must have 200,000,000 to have access to the fund, thus only large companies qualify. The first step down the Institutional Index fund has a minimum investment of $5,000,000. Going to the institutional site at vanguard provides these numbers and suggests what vanguards starting position on negotiating might be.
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Old 01-12-2016, 12:30 AM   #7
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To take the 500 equivalent at the lowest cost there is the Institutional Index fund plus but the 401k plan must have 200,000,000 to have access to the fund, thus only large companies qualify. The first step down the Institutional Index fund has a minimum investment of $5,000,000. Going to the institutional site at vanguard provides these numbers and suggests what vanguards starting position on negotiating might be.
The 401k plan has $5 billion dollars. I reckon it can probably meet the institutional fund minimums.
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