Just got the details of DW's new 401k plan and I am not impressed. Supposedly the 5.75% loads are waived, but almost all of the 25 fund choices have expense ratios between 1.0-1.5%. This is a far cry from my 401k options at megacorp, fewer funds but rock bottom expenses. In DW's plan there seems to be a lot of duplicate offerings from different management companies and possibly some closet indexers. The best option seems to be an S&P500 index fund that "only" charges 0.34% (MASRX). The next cheapest fund is an intermediate bond offering (CCIAX) at 0.80%! Or I could just leave it all in the money market fund (MRRXX).
DW will get 3% employer contribution automatically. My question is - should she make any additionally contributions? I would love to defer taxes on some income as we will probably be in the 28% bracket for 2008. However, the S&P500 is not my favorite index (would rather have total market index), and it is still overpriced compared to what I could get it for at Vanguard (0.15%). And given that tax rates could easily be higher by the time we retire (we're in our 20s) I am not sure it is wise to pay higher expense ratios today in the face of a questionable tax benefit down the road.
DW will get 3% employer contribution automatically. My question is - should she make any additionally contributions? I would love to defer taxes on some income as we will probably be in the 28% bracket for 2008. However, the S&P500 is not my favorite index (would rather have total market index), and it is still overpriced compared to what I could get it for at Vanguard (0.15%). And given that tax rates could easily be higher by the time we retire (we're in our 20s) I am not sure it is wise to pay higher expense ratios today in the face of a questionable tax benefit down the road.