crap 401K at work

[vic]

I am reading the four pillars of investing by Bernstein. It is a fabulous book. I am so glad to read that sticking with the index and some other basic selections is the way to go instead of chasing the market. This is the first time that I actually read something that makes sense and I find the insight into the mutual/broker type of businesses very refreshing. I am in the chapter where he discusses the crooks at the 401K management companies.

Based on this I decided to look at what my company's 401K management fees and other fees are. It is virutally impossible to look that up online. It mentions there are fees, but finding what they are is not easy. The prospectus is a huge tab delimted file. The fund names in the prospectus do not even match the fund names of the choices that are available in my account. I have to guess what could be what. Anwyay, from what I can see is that I am charged insane fees and sales commissions. 2% acquisition/redemption fee + 2% management fee.
So if in one year, I buy $1000 of fund A and then switch to fund B, I pay $20 in (acquisition) + $20 (redemption) + $20 (acquisition) + $20 (management) = $80 in fees. That is 8% of my money that goes to this bunch of idiots at Hewitt for doing nothing. Now I understand why my account is only going down (and I am not trading actively). No real info is available on their S&P 500 selection - that is my only hope of low fee/no load.

I work for a large company, they could have negogiated something better. The least they could do is to keep these financial managers offsite from now on. They are ready to come in again and entice us with 'education' to make some different choices in the account mix (more acquisition/redemption). Their latest new 'service' is automatic rebalancing for which they only charge 0.25% + (all the other redemption/acquisition fees they don't tell you about).

My biggest concern with my 401K now is to ensure that it does not errode too much before I quit and roll it into my Vanguard account. I am not even concerned about it growing. I don't want to give up the tax advantage and company match.

Vicky

[saluki9]

I'd check that a little closer. Hewitt generally does not deal in plans with fees like that. Being the largest adminstrator in the US, their fees are generally really low.

I'd make sure you aren't talking about fees for rapidly trading funds, which many plans have recently instituted to stop day trading in their plans.

[cute fuzzy bunny]

A lot of times fund charges "in the wild" are a lot higher than they are in 401k's. Many funds surrender or reduce their loads and higher expenses to get retirement plan business. I had the same problem with my wifes 403b; the funds all had different names than the fund providers generally available funds, and when I finally got at the information about costs the costs were a lot lower as well.

[HFWR]

Our Hewitt plan has some no-name funds that track SP500, Russ2000, Russ3000, EAFE, and short-term bonds. Fortunately, fees are fairly low, and a few years back they added a self-directed brokerage account, allowing much more diversification. All-in-all, not bad.

[vic]

Thanks for all the responses. I got a live person on the line and she said most funds are no fee or low fee. There is only a penalty for active trading with the international funds.

I guess they put the generic prospectus of funds offered "in the wild" (I like that definition ) out on the net. Nothing seemed to match, may even be the wrong prospectus anyway.

There are not too many choices, got most of it in the S&P 500 and bond fund. I have 10% in international stock funds

Question: they offer two international stock funds. One is international value, the other one is international growth. What would be a better choice?

Vicky

[Nords]

Quote:

Originally Posted by vic Question: they offer two international stock funds. One is international value, the other one is international growth. What would be a better choice? Vicky

Bernstein would say that value has a better historical return than growth.

[cute fuzzy bunny]

Without seeing it, i'd take the value fund as well. IIRC vanguards foreign value fund is a dog though.