401K stats from FIDO

[teejayevans]

For your amusement:

401(k) balances up 30% - Jul. 25, 2007

[LOL!]

A reasonably diversified portfolio of 75:25 stocks to equities is up more than 25% in the last year. How come 401k participants of at least 5 years only got 20%?

[Sam]

I find this interesting:

The average contribution rate for Baby Boomers, was 7.7 percent, just a little above the 7 percent overall average. And even though they are next on deck for retirement, one in three eligible Baby Boomers weren't participating in their 401(k)s at all.

[Webzter]

When you start at my company, you're automatically enrolled at 6% (the company match) and have to change that number if you don't like it. The article mentions that automatic enrollment helps a lot and I would guess that is the case here as well.

Kind of scary... my 401k balance is double the average and I've only been at this job for 3 years.

[teejayevans]

Originally Posted by Sam

I find this interesting:

Considering most get a company match, "interesting"
isn't the word I would use.
However, we must remember, by definition, 50% have
below average intelligence.
TJ

[JustCurious]

Originally Posted by LOL!

A reasonably diversified portfolio of 75:25 stocks to equities is up more than 25% in the last year. How come 401k participants of at least 5 years only got 20%?

Do you have a cite for that? VTTVX is very well diversified and has 79:21 stocks to bonds, and it is up 18.75% (not 25%) for the last year as of June 30, 2007.

https://flagship.vanguard.com/VGApp/...BarChart=false

[LOL!]

Originally Posted by JustCurious

Do you have a cite for that?

My portfolio and the IFA/DFA "65" portfolio. Index Funds | DFA Funds Approved Advisor - Dimensional Fund Advisors Approved

Go from mid-June 2006 (when the market tanked) to mid-June 2007

[LOL!]

VTTVX - Fund returns - MSN Money shows a 1-year return for VTTVX of 24.6%

[UVaOK]

Originally Posted by teejayevans

Considering most get a company match,
However, we must remember, by definition, 50% have
below average intelligence.
TJ

If by "average" you mean "median," then, yes.

[JohnDoe]

Why would my company make you wait a year before you can enroll in their 401k? I'm assuming that is perfectly legal.

John.

[Webzter]

Originally Posted by JohnDoe

Why would my company make you wait a year before you can enroll in their 401k? I'm assuming that is perfectly legal.

John.

One year seems excessive. My current company used to wait 6 months before they bumped their match from 2% to 6%. My previous company (retailer) used to have a 6 month blackout period. I'm pretty sure that blackout period was to help reduce enrollment churn (retail and fast food companies are sort of known for high store turnover).

Ask HR if they just set up the policy because they hate people. (ok, better not phrase it that way, but you might get some interesting answers if you do)

[NinjaPigeon]

Originally Posted by Sam

I find this interesting:

Possibly because some of the boomers in that category have pensions still. Probably more did at the beginning, considering they entered the workforce when pensions were still fairly common. 401ks were created in 1978, and took a few years to increase in popularity.

Although, doesn't change the fact that the ones who didn't hop on board the train during the late 80s and 90s missed a lot of free bull money.

[NinjaPigeon]

Originally Posted by Webzter

When you start at my company, you're automatically enrolled at 6% (the company match) and have to change that number if you don't like it. The article mentions that automatic enrollment helps a lot and I would guess that is the case here as well.

Remember this was a recent law passed by GWB. So while this would have helped the boomers (whether they liked it or not!), it wasn't possible several years ago:

New pension law opens floodgates to expansion of 401(k) plans, analysts say - The Boston Globe

Quote from article:

Third, the law will make it easier for companies to automatically enroll workers into 401(k) savings plans, rather than the current system that leaves the option with the worker.

[NinjaPigeon]

Originally Posted by Webzter

One year seems excessive. My current company used to wait 6 months before they bumped their match from 2% to 6%. My previous company (retailer) used to have a 6 month blackout period. I'm pretty sure that blackout period was to help reduce enrollment churn (retail and fast food companies are sort of known for high store turnover).

Ask HR if they just set up the policy because they hate people. (ok, better not phrase it that way, but you might get some interesting answers if you do)

Keep in mind it costs your company money to run the plan. You get charged a fee for every participant. The good news is passing thresholds in the number of participants and/or the value of the plan can reduce the cost per employee, but the fee is always there. Plus you have the administrative burden of doing the paperwork for enrolling someone (which is admittedly easy for an employer - more work for the TPA/fund provider).

Those are part of the reason. The biggest one is because it doesn't make a lot of sense to match an employee that isn't going to stick around. Yes, even with a vesting schedule, the money still gets removed from the company account and goes into the fund. Once it's in the fund it's actually easier to just leave it there than pull it back out. Generally a company does this as credit towards future fund expenses. But, again, this money Could have been sitting in the company account to be used for other purposes, like R&D.

That being said, a year seems excessive, and I would imagine that churn definitely plays a part in it. As an IT worker, most places I've worked were 90 days, and one was six months. When we set up our plan, we agreed 90 days was sufficient.

[Spanky]

Originally Posted by JohnDoe

Why would my company make you wait a year before you can enroll in their 401k? I'm assuming that is perfectly legal.

John.

It's legal. The longer the wait, the more $ that the company will save.

[JohnDoe]

Originally Posted by NinjaPigeon

That being said, a year seems excessive, and I would imagine that churn definitely plays a part in it. As an IT worker, most places I've worked were 90 days, and one was six months. When we set up our plan, we agreed 90 days was sufficient.

They wouldn't let us sign up, let alone get a company match, for 1 full yr. After the yr, we still had to wait for 1 of 2 open enrollment dates - Jan 1 or July 1. So I waited 15 months.

I also tried unsuccessfully to negotiate my enrollment upon me being hired.

[Andre1969]

Originally Posted by LOL!

Go from mid-June 2006 (when the market tanked) to mid-June 2007

Yeah, that was a pretty crappy time, roughly a year ago. Looking at some of my accounts, I've seen appreciation ranging from around 26% (my old 401k from Boeing) on up to around 50% (my Roth IRA with Janus). Those totals sound really nice, as long as we forget about that little drop that happened just a few weeks before June '06!

[NinjaPigeon]

Originally Posted by JohnDoe

They wouldn't let us sign up, let alone get a company match, for 1 full yr. After the yr, we still had to wait for 1 of 2 open enrollment dates - Jan 1 or July 1. So I waited 15 months.

I also tried unsuccessfully to negotiate my enrollment upon me being hired.

Having been on the other side of the table, my guess would be the TPA "suggested" that date, and the employer went with it. Remember, the TPA has to file all the IRS forms. So if they can do half the work for the same expense costs, they win.