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Old 05-15-2012, 12:03 PM   #21
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Federal employee, and I participate in the Thrift Savings Plan (TSP). I'm very happy with it, even though I'm an employee who's been around since way back, therefore I am covered under the older Civil Service Retirement System, meaning I do not get any matching funds to go along with my own contributions. This is because my COLA pension will be approximately twice the amount of those newer employees who are covered under a different system, called FERS. Those employees do get up to 5% match. Even with no match, I'm satisfied with my TSP and the options available to me for investment. I have been maxing my TSP for several years, including the age 55 catch-up amounts as soon as I became eligible for that, 4 years ago. I intend to leave my money in the TSP when I do retire, because I will be able to withdraw penalty-free anytime starting in 8 months from now, if I retire. If I switched my money to an IRA, I would lose that option. I'm happy, few if any complaints.
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Old 05-15-2012, 02:19 PM   #22
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Funny you should ask. I work for a small company that is fairly young. I am not impressed with our 401k choices, so recently I asked the Benefits person about fees (who is paying them), and about adding a Roth 401k. He couldn't answer the fees questions, and asked my why anyone would want a Roth. I explained the benefits, especially for younger folks, and he asked me a second time.
Be careful what you ask for. Our analysis of a Roth 401(k) showed that only the wealthiest folks in the company would benefit.

The rank-and-file:
1. Would be be totally confused and probably not choose the more beneficial traditional 401(k) option
2. Could use a Roth IRA outside of the company plan anyways
3. Would not save more than the limit of the outside Roth IRA anyways
4. Would increase their taxes because they wouldn't know about certain phase-outs due to higher adjusted gross income
5. Would be in a much lower income tax bracket in retirement anyways since they were not saving enough for retirement anyways.
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Old 05-15-2012, 04:50 PM   #23
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Be careful what you ask for. Our analysis of a Roth 401(k) showed that only the wealthiest folks in the company would benefit.

The rank-and-file:
1. Would be be totally confused and probably not choose the more beneficial traditional 401(k) option
2. Could use a Roth IRA outside of the company plan anyways
3. Would not save more than the limit of the outside Roth IRA anyways
4. Would increase their taxes because they wouldn't know about certain phase-outs due to higher adjusted gross income
5. Would be in a much lower income tax bracket in retirement anyways since they were not saving enough for retirement anyways.

I don't understand why the rank and file would not want to do a ROTH...

Most are in a much lower tax bracket right now... so they would not be in even a lower one when they retire as you have in #5...

Maybe your rank and file is in an industry where most people get paid a lot and are in the 25% or higher bracket... but where I work all but one is paid pretty well and most are in the 15% bracket when you factor in a wife and kids, home and tax deductions and their 401(k) and insurance deductions...
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Old 05-15-2012, 06:27 PM   #24
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If they are in the 15% tax bracket now, they will be in the 0% tax bracket in retirement. 0% is much lower than 15%. If they are in the 15% tax bracket now, they are not saving gobs of money for retirement.

If they are set on a Roth, they can simply get the company match while saving on taxes by investing in the traditional 401(k), then contribute to a Roth IRA outside of the 401(k) plan.

I'm in the 25% tax bracket now. I will be in the 0% tax bracket in retirement.

A Roth 401(k) is great for folks who contribute the maximum to their 401(k)s and to their Roth IRAs and have a pension plan and who will work to age 70. That is, the wealthy folks. For who retire early and with no pension plan will usually if not always do better in the traditional 401(k). That's because they can still convert to a Roth after they stop working when they are in a lower tax bracket.
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Old 05-15-2012, 08:28 PM   #25
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Except in the year they retire. I hope to switch to the Roth 401k and work a part year on my way out. Putting as much as I can in the tax free Roth, but being in a low bracket because of the partial year working.
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Old 05-15-2012, 09:23 PM   #26
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Except in the year they retire. I hope to switch to the Roth 401k and work a part year on my way out. Putting as much as I can in the tax free Roth, but being in a low bracket because of the partial year working.
Nice idea, but could you not achieve the exact same result by putting into a traditional 401(k) at first anyways, then converting to a Roth that amount of money?
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Old 05-15-2012, 11:30 PM   #27
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I don't think it would be as easy as that. I don't know if you can identify specific dollars from a 401k to convert. Is there a reason to prefer to do it that way?
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Old 05-16-2012, 12:18 AM   #28
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I am surprised that a number of people do not think that it is in the HR dept wheelhouse to handle the 401(k).... Heck, that IS part of their job... along with all the various insurance and employment laws.... if they are not doing it well, that means they are not doing their job well....

It is not the company's finance depts job... as mentioned, their job is to take care of the companies finances...

I think you are right for a large firm. But for a small or medium firm, the HR department consists of typical only a handful of people. Realistically their priorities are probably hiring, firing, resolving interpersonal conflicts, making sure that payroll is done correctly. If they are researching anything I imagine figuring out which health insurance(s) to provide is the top priority. Finding 401K plan with low fees is probably much lower priority than finding a 401K plan that requires minimal work on their part. I suspect the reason that many small and medium firms end up with lousy 401K is the same reason that lots individual with Amerprise agents as their financial planner. The high fee 401K plans have more aggressive salesmen.
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Old 05-16-2012, 01:37 AM   #29
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I have a 401k plan. It is 100% short term, therefore its performance over the last few years has been a paltry 1-2 %. It could do much better I am sure. I have no idea what the annual fees are.
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Old 05-16-2012, 02:17 PM   #30
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I received a letter the other day about changes. They are changing from 1 type of Vanguard TR funds to another type of Vanguard TR funds. They are the Vanguard TR Income, and the TR 2010 through TR 2060 funds. The current er is 13 basis points but these new funds will have an er of just 8.25 bp! In addition to those they have other equity and bond funds with er that can be as high as 80 bp. There's a S&P 500 Index type of investment, not a mutual fund, it's er is 4 bp.

I rolled over 1/2 of the 401k to Vanguard when I retired but I left money in the 401k Stable Value fund as I retired prior to 59 1/2 and just in case I wanted to have a fall back if I needed money. I sometimes market time with that money exchanging into the S&P 500 option. I made some good purchases last summer but got out when it hit 1344 but still made a nice return for the 7 months it was invested. Not sure what to do now, it's either a dreadful time to buy or a great opportunity. Sell in May or are we on the cusp of the next secular bull market but don't tell the BH this or they'll weep and gnash their teeth. Time will tell.
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Old 05-16-2012, 03:09 PM   #31
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If they are in the 15% tax bracket now, they will be in the 0% tax bracket in retirement. 0% is much lower than 15%. If they are in the 15% tax bracket now, they are not saving gobs of money for retirement.

If they are set on a Roth, they can simply get the company match while saving on taxes by investing in the traditional 401(k), then contribute to a Roth IRA outside of the 401(k) plan.

I'm in the 25% tax bracket now. I will be in the 0% tax bracket in retirement.

A Roth 401(k) is great for folks who contribute the maximum to their 401(k)s and to their Roth IRAs and have a pension plan and who will work to age 70. That is, the wealthy folks. For who retire early and with no pension plan will usually if not always do better in the traditional 401(k). That's because they can still convert to a Roth after they stop working when they are in a lower tax bracket.


I think that when you are talking about people who are not saving a lot of money, the ROTH 401 is not a bad choice... at our company you can contribute to one and still get the match... since you have to contribute 6% of your salary to get the full match, that is a lot of savings for someone that does not save a lot...
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Old 05-16-2012, 03:24 PM   #32
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Our plan used to be "great" but I would say it is only good now. We have a 401k that matches dollar for dollar up to 6%. During the rececession they suspend the match to 3% but reinstated it last year.

In addition we also had a pension where the employeer contributes 6% of your gross income each year. So if you contributed 6%, the employeer would add another 12% in total between the two plans. Seemed like this was a nice perk comparitively?

The rules have recently been change to factor in years of service so the younger employees and any future new hires, will not get as lucrative of a package.
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Old 05-16-2012, 04:22 PM   #33
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I think you are right for a large firm. But for a small or medium firm, the HR department consists of typical only a handful of people. Realistically their priorities are probably hiring, firing, resolving interpersonal conflicts, making sure that payroll is done correctly. If they are researching anything I imagine figuring out which health insurance(s) to provide is the top priority. Finding 401K plan with low fees is probably much lower priority than finding a 401K plan that requires minimal work on their part. I suspect the reason that many small and medium firms end up with lousy 401K is the same reason that lots individual with Amerprise agents as their financial planner. The high fee 401K plans have more aggressive salesmen.
I agree... a small firm probably does not have dedicated people to handle the retirement needs.... but I do not think that the accounting dept would be much better... most HR people are supposed to know about the needs of HR..... just because they are in a small firm should not take this away from HR...

I also agree that aggressive salesmen or even bad management can lead to bad plans... my sister worked for a gvmt entity and the rules allowed the expense ratio to be no more than 1.25%.... SO, all plans that were offered had 1.25% expense fees... if the fund had a smaller fee, the record keeping fee was higher to get them to that 1.25%....

With all the info now available, it is easy to get with FIDO or TRowe or one of the other big firms.... they take some pretty small plans...
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Old 05-16-2012, 07:49 PM   #34
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"Do you have a 401k" , yes over 25 yrs.
"how good is it" Wide open now with a PCRA.

"and are changes coming July 1? " who cares......

http://finance.yahoo.com/echarts?s=%5EGSPC+Interactive#symbol=^gspc;range=1 9960402,20120402;compare=;indicator=volume;chartty pe=area;crosshair=on;ohlcvalues=0;logscale=off;sou rce=undefined;

It was a failed experiment to save companies money. And it worked.
(For the Co's)
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Old 05-16-2012, 10:26 PM   #35
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Have a 401k. It is OK...work for a smallish company (under 100 employees). There is no match but there is a profit sharing contribution each year which varies in amount and is made whether or not you contribute to the 401k.

Plan is with Fidelity. I'm not that enthused with most of the fund choices but it is...OK.

Don't know if anything will change
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Old 05-17-2012, 12:13 AM   #36
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This? Looks ok to me?



Big Changes in 2012 That Affect You!

Beginning July 1, 2012, the Department of Labor Regulation 408(b)2 will require plan providers (companies who provide various elements of tax-deferred plans to employer firms) to disclose fee information to 401(k) and 403(b) plan sponsors (employers who offer these plans to their employees).
The 404(a)5 Regulation that requires disclosure of all fees to plan participants goes into effect on August 30, 2012. This regulation requires fees be broken out clearly on plan participant quarterly statements by Q3 2012. For example: Your plan balance deducted these fees last quarter: a) $650 for advisory fees (although perhaps you rarely or never see this advisor?), b) $213 for third party administration and record keeping, c) $705 for underlying annual expense ratios for the mutual funds you're invested in, etc.
Disclosure of previously hidden fees is good for plan sponsors - as long as they can demonstrate their 401(k) plan has "reasonable and appropriate fees."
In sum, regulations 408(b)2 and 404(a)5 mean:
  1. Plan service providers will be required to submit detailed disclosures about fees to plan sponsors - the onus is on plan sponsors to verify they've receive vendor disclosures, examined them and determined if the contents are "reasonable."
  2. Disclosure is required for service providers in plans who expect $1,000 or more in direct or indirect compensation.
  3. Plan participants will no longer be in the dark about undisclosed fees.
Plan service providers will be required to disclose to the plan fiduciary – in writing:
  • A description of services provided
  • If the service provider supplies any services as a fiduciary
  • What those services are
    • Discussion of all direct and indirect compensation
    • A statement about compensation paid by related parties
How Will This Affect You?
  • If you’re a plan sponsor or plan participant, you’ll become fully aware of fees you're paying (my observation is that plan sponsors typically are unaware of fees they pay).
  • Plan participants will see fees for various 401(k) and 403(b) services in black and white on their quarterly investment summaries.
  • Full disclosure includes indirect compensation.
  • Plan participants may begin to raise concerns about their plans with the plan administrator and plan sponsor – including questions about the definition of “normal and reasonable” fees.
  • Plan sponsors with above-average fees may need to consider ways to bring relatively expensive plans more in line with industry averages - or face disgruntled plan participants who may consider legal action.
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