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401(k) Participants' Mutual Fund Expenses Declined
Old 06-14-2013, 08:53 AM   #1
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401(k) Participants' Mutual Fund Expenses Declined

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Findings from the report indicate plan participants holding mutual funds tend to invest in lower-cost funds. In 2012, the average expense ratio on equity funds offered for sale in the United States was 1.40%. The 401(k) plan participants who invested in equity mutual funds paid less than half that amount (0.63%). Expenses paid by 401(k) investors were also lower than the asset-weighted average expenses for all equity fund investors (0.77%).
PLANSPONSOR.com - 401k Participants Mutual Fund Expenses Declined
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Old 06-14-2013, 03:22 PM   #2
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This is consistent with my own personal experience with T. Rowe Price.
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Old 06-14-2013, 07:32 PM   #3
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Our 401K is managed by Vanguard and expanse ratios of all funds offered in our plan range from 0.16 to 0.24. This is about some of the lowest one can find. Hope most employers aggressively work to reduce fees in their plans.
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Old 06-15-2013, 08:02 AM   #4
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Starting in 2012 401k plans were required to disclose fees. Prior to that they did not have to and I suspect most did not. Mine did not. They can still be hard to find but they are listed now. I suspect that employers are more incented to negotiate better fees now that employees can see them. I also suspect that only a handful of employees are paying attention.
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Old 06-15-2013, 10:49 AM   #5
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Originally Posted by gozer View Post
Starting in 2012 401k plans were required to disclose fees. Prior to that they did not have to and I suspect most did not. Mine did not. They can still be hard to find but they are listed now. I suspect that employers are more incented to negotiate better fees now that employees can see them. I also suspect that only a handful of employees are paying attention.
Bingo! This is the big news (bolding mine). Our corrupt congress basically allowed this to go on for far too long, instead lapping from the troughs of the financial industry. Imagine asking what the fees were on your own 401(k) and being told, "it is none of your business".
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Old 06-15-2013, 11:32 AM   #6
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Plan fees for my TSP are .027. I think I'd have a hard time beating that anyplace. The downside is very limited withdrawal options. When I retire later this year, my options are: a full or partial lump sum withdrawal, rollover of full or partial balance into an IRA etc, or monthly equal withdrawals that can be adjusted just once each year.

If I decide I want to buy a new boat, or need an extra $10,000 for an emergency, I cannot withdraw it from my TSP. The limitations are part of the reason the fees are so low. I like the low fees, and the somewhat limited investment options in the plan are adequate for my purposes.

Also, I like the relative safety of the G fund, which is only available in the TSP. I don't plan to keep my money there (G fund) on a permanent basis, only when the market is in the tank long-term.

TSP withdrawals are taxed by some states, but not others. In Texas, where I currently work and have a legal residence established, it would not be taxed by Texas. However, wife wants to us to be retired in Louisiana (where she is living and waiting for me to retire and get rid of my "bachelor pad" in Texas). That would mean my TSP would be subject to Louisiana state income taxes. In reality, the amount wouldn't be huge. I believe maybe 2% or so. My federal retirement and my military retirement won't be taxed in either state.
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Old 06-15-2013, 03:52 PM   #7
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1.40%, 0.63% and 0.77% ER makes me cringe when I compare it to my estimated 0.12% ER for my entire VG portfolio of mostly indexed funds.

It's all relative I guess.
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Old 06-17-2013, 09:21 PM   #8
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Originally Posted by polaris007us View Post
Our 401K is managed by Vanguard and expanse ratios of all funds offered in our plan range from 0.16 to 0.24. This is about some of the lowest one can find. Hope most employers aggressively work to reduce fees in their plans.
The sad thing is that last year when we changed providers and the MF expense ratios were listed on the new options, several engineers at the consulting firm I work at voiced some disgruntlement with the accounting guy. When I called to politely express my thoughts on the matter, he instantly fired back with "BUT THE EXPENSE RATIOS DON'T MATTER, YOU AREN'T PAYING IT".

Must have had a good brainwashing lunch with the new account rep assigned to our company, who gave him a few talking points to spit back at anyone intelligent stupid enough to call and complain.

Sadly, just as a vast majority of the public has little grasp of personal finance, and not many more know about expense ratios, etc....many 401k contacts at companies are clueless about it as well. If you have a plan with truly low total expenses/fees, count yourself lucky! (Or perhaps I'm just one of the unlucky few? )
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