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Default fee of 0.18%?
Old 02-18-2021, 12:37 AM   #1
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Default fee of 0.18%?

I'm mostly invested in ETFs, most with ERs under 5 basis points (e.g. VTI is 0.03%) although I do have some with higher ERs (e.g. BND is 0.20%)
I'm calculating my average at around 0.10 based on the respective balances.
I must say my 401(k) is likely hitting me with extra expenses, but I doubt I'm up to 0.18.
I am looking at it wrong, or just truly experiencing below average fees?
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Old 02-18-2021, 05:37 AM   #2
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Those are all low fees. End of story.
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Old 02-18-2021, 06:32 AM   #3
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The default fee % in Firecalc of 18 bps was at one time a typical fee average for index funds. It is not currently reflective of the typical fee.
No issue, just change the fee% yourself to your actual percentage. It can make some difference if your account is large enough.
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Old 02-18-2021, 08:51 AM   #4
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I long ago set expense ratio at 0.10% in FC to reflect a mix of index funds and some legacy funds with big taxable gains (e.g., PRIMECAP). The range of 0.04 to 0.18 won't make a large difference in your results. Maybe $1000/yr one way or the other on retirement spending. But if you are paying 1.0% of assets under management to an advisor - look out.
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Old 02-18-2021, 09:08 AM   #5
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@BlueberryPie - Fees have dropped to very low levels for those investing through lower cost companies (Vanguard, Fidelity, Schwab...), especially if investing in indexes. So 0.18% may be higher than many here pay in fees. Still pretty low though.

BTW - You mentioned BND at 0.2%. If bought at Vanguard directly, BND index fee is 0.035%. https://investor.vanguard.com/etf/profile/BND

FWIW - I have a mixture of ~8 VG index funds and ~3 individual stocks. Average fee for my whole portfolio is 0.04%. Just another example of how low fees have gotten.
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Old 02-18-2021, 09:46 AM   #6
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Thanks, and yes it wasn't BND at 0.2, it did seem hight

Also good point that anything below 0.18 is not going to make much difference.
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Old 02-18-2021, 09:56 AM   #7
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Quote:
Originally Posted by BlueberryPie View Post
... I must say my 401(k) is likely hitting me with extra expenses, but I doubt I'm up to 0.18. ...
FWIW there is a disclosure form "404a-5 Participant Fee Disclosure" that you are legally entitled to get. More: https://www.dol.gov/sites/dolgov/fil...d-expenses.pdf and When Changes to 404a-5 Participant Fee Disclosure Data Requires Additional Participant Notifications - 401khelpcenter.com

Some 401ks have a sort of AUM wrap fee charged by the plan "service provider." I saw one disclosure form (not mine) where that fee was 1.5% !! More generally there are various fees from the provider that are typically all or mostly paid by the employer/sponsor, but there seems to be some rape and pillage out there. Page 4 of this one is interesting: https://myplan.nwservicecenter.com/i...eqId=800086236 Note the possibility of a 2% back-end load if the employer terminates the plan.
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Old 02-18-2021, 05:02 PM   #8
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Thanks OldShooter, good info and I looked it up for my plan.

My employer changed 401(k) provider a year ago. I knew the new plan had better fund options in the new plan and lower ERs in those funds. Most of the new investment options are around between 0.030% and 0.05% exce[t for a few managed ones htat are as high as 0.21% (but I don't invest in those).

What I had missed is that there is indeed an AUM-based fee, and the old plan had a 0.56% fee (was in it for about 5 years) but the new plan has a fee of 0.05%. I need to buy our CFO a beer for making the change!

Neither plan offers an in-plan rollover (or whatever that's called) so I'd need to change job to take the money our of the 401(k) to put it in a rollover IRA, but at least now I feel even better about the 401(k) change.
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Old 02-18-2021, 05:25 PM   #9
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Back in the day, the ER of Vanguard index funds was 0.18% and was considered rock-bottom. I assume that was the source of the default value in Firecalc.
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Old 02-18-2021, 05:35 PM   #10
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Quote:
Originally Posted by BlueberryPie View Post
... What I had missed is that there is indeed an AUM-based fee, and the old plan had a 0.56% fee (was in it for about 5 years) but the new plan has a fee of 0.05%. I need to buy our CFO a beer for making the change!

Neither plan offers an in-plan rollover (or whatever that's called) so I'd need to change job to take the money our of the 401(k) to put it in a rollover IRA, but at least now I feel even better about the 401(k) change.
Well, good on your CFO! One option, though probably not worth it is to contribute enough to the 401k to get the match and then contribute the rest of your savings to a tax-sheltered plan outside of the 401k. But where the .56% AUM fee would have been worth dodging, 5bps is not much to fight over.
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Old 02-18-2021, 06:32 PM   #11
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I'm also not aware of any tax-sheltered option outside of my 401(k) I would take advantage of instead.
The annual limit for the 401(k) at my age is $26K, but only $7K for a Roth IRA and not eligible for a traditional IRA since I'm covered by a 401(k),
And I'm fortunate enough in late-career to be making enough to max out my 401(k) and Roth IRA both (and yes, I do realize that at means I saved what other people get as a full salary, but at least I'm doing by doing frugally to save a large portion of my paycheck)


I also contribute to an HSA for its "triple" tax advantage. Its funds ERs almost as good as the 401(k), but now you got me curious about "maintenance fees".
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