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New 401k
Old 06-10-2008, 08:23 PM   #1
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New 401k

Hi, I just started a 401k with my small firm through The Hartford.

They offer the following funds:

AIM Real Estate

AllianceBernstein International Value

Lord Abbett Small Cap Blend

Fidelity Advisor Leveraged Company Stock (Mid Cap)

American Funds The Growth Fund of America (Large Cap)

The Hartford Value Opportunities (Large Cap)

Franklin Income

Oppenheimer International Bond


What I really want to know is if we should continue with The Hartford. My financial knowledge is nil, but I trust your recommendations. Even though our firm just started a 401k plan, I don't want to make any huge mistakes with the company I'm using. I had heard some interesting things about the amount of fees they charge to manage the funds and I'm not sure I totally understand it. Some of the garbage they send about the 401k investment program is just absolute mumbo jumbo. Our broker recommended the company, and I'm just concerned. If we made a mistake, I could put up enough fuss to get it changed.

My second and less crutial delema is regarding the allocation of investments. I already have a balanced IRA which is pretty much a domestic large cap fund, so I was planning on mainly investing in the Fidelity Advisor Leveraged Company Stock and the Alliance Bernstein International Value.

I am 27 YO single guy and just getting into the investing game. I don't mind a medium-high amount of risk considering my age and current financial status. I would greatly appreciate it If you have any recommendations as to what direction I should be headed.
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Old 06-10-2008, 09:14 PM   #2
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My spouse's 401(k) is with Hartford. It sucks. All funds are wrapped in an annuity with an added 1.25% charge, so a fund with expense ratio of 1% actually costs 2.25%.

Bluntly: you made a big mistake. For more help with starting a 401(k) plan for a small firm please read: Bogleheads :: View topic - 401k links and suggestions and the recommendation of using EmployeeFiduciary.
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Old 06-10-2008, 09:18 PM   #3
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For asset allocation help, you can read the tutorial here ( Asset allocation tutorial? ) or consult with the free bogleheads forum setup for that purpose: Bogleheads :: View Forum - Investing - Portfolio Help
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Old 06-10-2008, 09:28 PM   #4
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Okay... That's kind of what I was reading that companies can rip you off with fees which is silly when there are clearly companies that can charge 1/10th of the fee. I know many here recommend Vanguard, T Rowe Price, and Fidelity, but I don't believe these companies offer 401k programs, only mutual fund options, right? So who should I be using? I'm I asking a stupid question? I don't think I'm getting it.

I believe Annuities are typical for these plans. How can I avoid them? Are the expense ratios just so ridiculous that I should just GTFO? I mean i plan on keeping my 401k for a long long long time so i don't want to make any decisions over a period of years when I can put a stop to it very early.
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Old 06-10-2008, 10:04 PM   #5
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Old 06-11-2008, 02:39 AM   #6
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Please clarify for us:
1. Are you the business owner?
2. Do you have the power to change the employer 401(k) plan and any administrator?

If you answer YES to either, then I would respectfully suggest that your company change plans after more research. From an employer point of view, there are certain legal things that the company needs to do with a 401(k) plan to satisfy the law and cover their ass that employees do not often see.

If contracts have been signed, I doubt the plan could be changed for another year or so.
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Old 06-11-2008, 07:22 AM   #7
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1) no
2) yes

I do have the power to change things... This whole annuity thing kind of scares me. I don't want to get ripped off when I'm putting 10% of my salary in this thing. We have already signed everything. :-(. Is it just a little mistake or like putting my whole retirement in a VA mistake?
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Old 06-11-2008, 07:51 AM   #8
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I would suggest that it's a temporary big mistake. I think it's a big mistake because the fees will eat you alive. I think it's temporary because you can switch 401(k) providers eventually.
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Old 06-11-2008, 02:34 PM   #9
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Quote:
Originally Posted by DLS1 View Post
1) no
2) yes

I do have the power to change things... This whole annuity thing kind of scares me. I don't want to get ripped off when I'm putting 10% of my salary in this thing. We have already signed everything. :-(. Is it just a little mistake or like putting my whole retirement in a VA mistake?
If you can change the 401k, look up on web sites for T Rowe, Fidelity or Vanguard about small company 401ks.

I looked this up for a friend around 4 months ago at T Rowe and I know it's possible.
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Old 06-11-2008, 02:45 PM   #10
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What about American Funds 401K?
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Old 06-11-2008, 03:28 PM   #11
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Also, what do you mean when you say, "wrapped in annuities?" Remember, I'm a newbie, and I have trouble grasping the concept of a VA much less the term annuity. I realize you are saying this means there are additional fees, but do the annuities exist only to rob me or is their some goal they are "trying" to accomplish? I mean I know what an annuity is, but I have trouble comprehending how this relates to me or my 401k plan.
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Old 06-14-2008, 03:07 AM   #12
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Quote:
Originally Posted by DLS1 View Post
Okay... That's kind of what I was reading that companies can rip you off with fees which is silly when there are clearly companies that can charge 1/10th of the fee. I know many here recommend Vanguard, T Rowe Price, and Fidelity, but I don't believe these companies offer 401k programs, only mutual fund options, right? So who should I be using? I'm I asking a stupid question? I don't think I'm getting it.

I believe Annuities are typical for these plans. How can I avoid them? Are the expense ratios just so ridiculous that I should just GTFO? I mean i plan on keeping my 401k for a long long long time so i don't want to make any decisions over a period of years when I can put a stop to it very early.
My company has a 401k through Vanguard.

There are no stupid questions, keep asking. I'm no expert on 401k setups...but perhaps a few notes are in order.

A 401k is not different than a mutual fund...a mutual fund is/can be an option offered INSIDE of a 401k plan. Think of it as a store like WalMart. Walmart sells clothes, electronics, and pet supplies. Walmart is the equivalent of the 401k, and clothes, electronics, and pet supplies are the equivalent to the mutual funds....they are OPTIONS WITHIN the 401k. Other options besides mutual funds could include bond funds, company stock, money market funds, and so on.

I can't speak to the "wrapped in annuities" comment...I have no idea what he means.

At our company, when you retire, you can use the balance in your 401k to purchase an annuity, but it is completely optional. Not all annuities are bad. IMO, deferred annuities are bad (they are complex and the fees are high), but immediate annuities are ok.

Deferred - pay the company a sum now, and then in the future (years from now) they will give you a payment for life.

Immediate - pay the company a sum now, and they will give you an income for life starting now.

http://www.annuityadvantage.com/annuitiesexplained.htm

Good luck.

Dave
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