torqued about 401K


Dryer sheet aficionado
Sep 26, 2007
I've been pretty torqued off about my companies 401K for some time now. We can only chose from 10 diff funds. I swear the only way it grows is because I max out the contributions. I'm in the best four earning funds which are also the riskiest. The earnings on the other funds are pathedic. The only reason I'm still in it is because of the tax breaks. I have a firm belief that I want to quit my job as soon as I feel the time is right. Roll over my 401K into something that actually makes money. Does anyone else feel the same way? Cletis

I was on the 401k selection committee at my work. Basically, they choose funds that splatter the morningstar asset class box and also don't try to overwhelm the participants with too many choices.

Generally they start with:

Large cap fund
Small cap fund
Intl fund
Real estate fund
Possibly a total market fund

Then from there, they sometimes break it out into value and growth offerings. The target retirement funds are all the rage, so they throw in a few target retirement date funds, and have a conservative/aggressive fund (which is just a mix of the other funds that they decide the allocation).

The thing I dislike is it usually ends up being very expensive offerings in each asset class, since that is how the 401k is managed. Offload the cost to participants. Other than that, you can't beat the tax benefit!
My spouse has a 401k plan from Hartford with embedded annuity fees. The fee disclosure shows that she pays about 2.5% annually. That is more than the total possible company match that she can get contributing the maximum to her 401k. The money market fund was actually losing money for a few years there because of the low interest rate and the high fees. Despite that, she gets the 33% tax break and has selected a REIT fund, an international fund and a small cap value fund.

You didn't write how long you have used your 401k nor how much money you had in it. I think it is true that one's contributions will provide the bulk of the annual increase for the first decade of contributions. Only after that will the account have a chance to grow more from investment return. The math says this is the way it has to be.
If the choices really aren't performing well compared to the rest of the market, consider contributing only as much as will get matched, and invest the rest in a traditional or Roth IRA, or just in a normal taxed account. Tax deferral is nice, but if you buy and hold in a taxed account you are deferring income there until you sell too, and dividends are taxed at a lower rate.
I have about 175K in my 401. I've been contributing about 10yrs. In the beginning the company handled the 401 and we also had a committee that chose the funds. The last 8yrs we've had several diff fund managers. Prudential manages it now. Cletis

Could you list your funds for us?
My 401(k) probably only has about 10 - 15 funds but they are pretty good choices including target retirement funds from Schwab. I actually only utilize about 4 to keep it simple as they have broad based index funds available that I use as part of my overall AA. eg I use Schwab total bond index.

I would be more concerned about the funds themselves rather than the quantity Son has just become eligible for 401(k) participation in his first job since graduating. He asked my advice on an AA which I did for him. His choices were pretty good from being able to get a broad diversification but they were mostly funds with high costs, so I told him to put in as much as he needs for a company match for now. Any extra he wants to save he can use his VG Roth IRA we opened for him on his 18th birthday until we see how his 401(k) funds work out.
I guess sometimes its good to work for a megacorp, 25 core funds (mostly
VG, with the already low fees cut by 75%) plus you can pick from a menu
of additional 200+ funds for some small admin fee.
I thought I'd seen somewhere that you can roll over a portion of your 401k without leaving your employer (under certain circumstances) - here's a summary...

Can I rollover my 401k while still employed?

As long as there's a provision in the plan for it, it can be done.

However, if your plan is a 403B, they shut that down in Spetember..........;)

Why don't you try to improve your choices? A lot of outfits will add additional options if they get enough strong input. Get some of your other workers on board with you. But if you're loud enough and persistent enough, a majority of one may be sufficient. Go in with the facts (choices, their returns, the costs, etc.) and offer up some juicy alternatives. They might even put you in charge of making it happen. How cool would that be.;) Boy would I have enjoyed that project. And what an education you could give yourself while doing it.

Go for it!
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