patrick.net

Yet one more reason to be in a self directed IRA. Fees are minimal.

This isn't new news. I'm surprised ( but maybe I shouldn't be ) that people haven't caught onto it by now.

We had a 401k administrator show up to the biotech I worked for 8 years ago to "school us" on why we should contribute ( I do get the match then roll over when I leave ) and I posed this question to him. He looked like a deer in the headlights and wouldn't answer.

If more people did this maybe the our co-workers would figure it out? Later it was brought up with my lunch crew and nobody was aware...

Yes this is a well known fact.

Think about it for a minute:
- they put in none of the money,
- they take none of the risks,
- they get 2/3 of the returns.

In fact, given a long enough horizon, even a small % fee would eat up a large fraction of your portfolio. Luckily people rarely invest for such long periods.

I think the recommendation was to go with low fee S&P index type fund.

Glad to see America's worker's "benefits" are benefitting someone.

Think about it for a minute:
- they put in none of the money,
- they take none of the risks,
- they get 2/3 of the returns.

They're really "earning" their money.

"There's a sucker born every minute." -David Hannum?

Robert Sproul says

If ... your fees are 2 percent

That's a big "if". Why not make it "20 percent" for even catchier headline? ;)

Still a much better return then health insurance

How sad is that

Straw Man says

That's a big "if"

Yeah, the average is somewhat less.
Of course studies show that 80% of people don't know what they are tithing to Wall Street let alone what the long term implications are.

Famous Wall Street saying: Guy goes to Manhattan, is shown all the yachts and golf courses and penthouses of stockbrokers and asks:

"Where are your clients' yachts?"

hahaha

Call it Crazy says

Heraclitusstudent says

Luckily people rarely invest for such long periods.

Luckily, almost 3/4 of the population live paycheck to paycheck and millions more don't have $1000 saved away for an emergency...

I don't think 401K admin fees is an issue for most people...

There are 52 million people with 401k plans as of 2010. What is your definition of most people?

The problem is that you can't afford not to invest up to the company match limits. Even with the potentially high fees, it's a no-brainer.

It's up to corporate HR/execs to push back to Wall St. And that obviously isn't happening...

Call it Crazy says

The OTHER 250 million that don't....

So children, non working spouses, and retired people need to get their IRA's up and running. Slackers. Oh wait, none of them are eligible for contribute to an IRA.

The problem is the comission structrure. Why do they have to get a percentage of your *assets* ??

Even with a 0.10% comission (Vanguard), you will eventually loose those 2/3rds. Granted, you have to wait 1000 years.

CL says

I think the recommendation was to go with low fee S&P index type fund.

This is the right choice for most folks.

Call it Crazy says

bob2356 says

Call it Crazy says

The OTHER 250 million that don't....

So children, non working spouses, and retired people need to get their IRA's up and running. Slackers. Oh wait, none of them are eligible for contribute to an IRA.

Bob, the OP was about 401k's, NOT IRA's...

Dementia really sucks... There's medication for that, you should visit with your neurologist!

401k is an (I)individual (R)etirement (A)account. Says so in section 401(k) , gee I wonder where the name came from, of the tax code and the revenue act of 1978 that authorized it. Historical footnote, 401k's originated to try (haha) to keep corporations from raiding their pension funds.

You are correct however in that common usage today is that the term IRA is used specifically for what used to be commonly known as a traditional IRA.

Good thing you pointed this out. It makes your 250 million comment look even more stupid since 401k is a specific type of IRA plan only offered by employers for employees. I think a reasonable person (not you) can say 52 million 401k plans out of a work force of 62 million that is 401k eligible is most people who COULD be affected.

We can and do invest in 401ks in large numbers.

Is it a good idea? That's the question.

From what I understand, it began as a way for fat cats to invest. That would make it seem democratized. Did they not charge the 1% the 2%? Or are rich bastards stupid too?

CL says

We can and do invest in 401ks in large numbers.

Is it a good idea? That's the question.

From what I understand, it began as a way for fat cats to invest.

That's not true. It began with a benefits administrator called Ted Benna in 1980 who read the new in 1978 401(k) section of the tax code and realized that a company could set up a retirement account funded by pre tax dollars and do matching contributions. The IRS signed off on it and his company started the first one.

I saw Ted Benna was in the media 2-3 years ago saying 401k's have become a monster that is too complex, too expensive, and is turning people off. He certainly thinks fees are too high.

The reason I know the name is that the consulting company I worked for in the early 80's was part of the group that got the rules clarified on who was a consultant and who was an employee for the purposes of 401k's. I was classified as consultant and told to open a traditional IRA. Oh well, employer match would have been nice.

its as simple as that.
of course your 401k plan has to offer that.
The best plan is where you can direct 100% into a self directed acct that has access to thousands of funds..

bob2356 says

Yet one more reason to be in a self directed IRA. Fees are minimal.

Call it Crazy says

Thanks for informing me that we have a working age population in this country of 62 million (those age 16 and older).

It's a good thing there are no retirees (aged 65 to 90+) that have a 401k account....

Working population, not working age. Don't be a putz, sorry that's like asking you not to breath. Tell you what, if you can figure out how many aren't working but are desirous of setting up a 401k then I will be glad to add them into the number..

Of course there are retirees with 401k's but it would be impossible to figure out how many. Not a great many, 401k's didn't really take off until the 90's. Again, go figure it out and I'll be glad to revise my number.

bob2356 says

That's not true. It began with a benefits administrator called Ted Benna

Yeah. I know that. I guess I should have said, 401k as we know it, was in the code and then promptly exploited by fat cats. Isn't that correct?

What you quoted seems to support that.

Call it Crazy says

So, out of the potential of 205 million working age population and another approx. 44 million over 65, that would put the total close to 250 million. You claim the number with a 401k is around 52 million. That's roughly 20% of the population...

Using your basic math skills, when I say "I don't think 401K admin fees is an issue for most people", would that be accurate?

Unless you have a different definition of "most"...

Well I thought that paycheck to paycheck thing was actual working population. I'll try to work on divining you mean next time. Whatever dude, take it your way.

If 66% of the population is working age and 62% of them are actually working or about 40% of the population then how are 75% of the people living paycheck to paycheck. Damn that new math is tricky stuff.

CL says

bob2356 says

That's not true. It began with a benefits administrator called Ted Benna

Yeah. I know that. I guess I should have said, 401k as we know it, was in the code and then promptly exploited by fat cats. Isn't that correct?

What you quoted seems to support that.

I don't understand exploited. The most you can put in a year is 15k. How is anyone getting around that?

CL says

401k as we know it, was in the code and then promptly exploited by fat cats.

My understanding is the original law was written as a deferred income tax dodge for the wealthy.
I am sure that Wall Street quickly appreciated the gargantuan pool of unsophisticated money that its broad application created.
Better to deal with millions of muppets, and the inherent churn, than a handful of (theoretically) savvy pension fund managers.
From the PBS show: "The 401k is one of the only products that Americans buy that they don't know the price of it. Or the quality. Or the Danger. The Mutual Fund industry has been able to protect themselves against regulation that would expose the danger and the price of their products."
Convince Joe Blow that he is an "investor", has to be for his future and his family, and then bleed him into a bucket.

Call it Crazy says

bob2356 says

how are 75% of the people living paycheck to paycheck.

I realize it's hard for you to comprehend, but there are people receiving an income outside of work. Here's a hint (U.E., S.S., pensions, disability, etc.)

I've never heard a ss, pension, disability, UE(?) check called a paycheck before. Last time I checked paycheck was for payment in exchange for work. That's how all the major dictionaries define it. But far be it for me to question you and marketwatch's redefinition of centuries of traditional usage to make your ideological points.

bob2356 says

I don't understand exploited. The most you can put in a year is 15k. How is anyone getting around that?

You can put "shares" instead of cash.

Call it Crazy says

bob2356 says

I don't understand

That seems to be a trend with you!

Only when trying to interpret your fluent gibberish.

FortWayne says

bob2356 says

I don't understand exploited. The most you can put in a year is 15k. How is anyone getting around that?

You can put "shares" instead of cash.

Explain how that works, I've never heard of it and I've had 2 401(k)'s with 2 different employers.

why don't we make it 3% over 60 years and they'll take 80%, lol?

who the heck would choose 2% off the top in a 401k? that is simply idiotic. An index is 0.2% and most 401K are three years. For most people, they take $200 bucks over three years.

401K is the safest wealth generation tool for the majority. All the smart people max out the damn thing.

SFace says

why don't we make it 3% over 60 years and they'll take 80%, lol?

who the heck would choose 2% off the top in a 401k? that is simply idiotic. An index is 0.2%

More like 0.02%

SFace says

All the smart people

These are a distinct minority.
Studies show that 80% don't know what their fee structure is.
SFace says

401K is the safest wealth generation tool

If that is true why are the majority facing a severely underfunded retirement?
The median retirement account balance is $12,000 for near-retirement households.

Straw Man says

who the heck would choose 2% off the top in a 401k? that is simply idiotic. An index is 0.2%

More like 0.02%

I am certain that you are whip smart and get the best deal, phenomenal returns, and are funding your account at an appropriate rate.
The average shmoe is getting fucked.

Robert Sproul says

SFace says

All the smart people

These are a distinct minority.

Studies show that 80% don't know what their fee structure is.

SFace says

401K is the safest wealth generation tool

If that is true why are the majority facing a severely underfunded retirement?

The median retirement account balance is $12,000 for near-retirement households.

Because "the majority" doesn't bother to fucking contribute to the fucking retirement accounts, duh!

Robert Sproul says

The average shmoe is getting fucked.

The articles with catchy headlines like the one we are discussing do not help the situation. They make it worse.

Investors can't determine which 401K to invest in based on the fee structure. It's a company managed retirement fund...

tatupu70 says

Investors can't determine which 401K to invest in based on the fee structure. It's a company managed retirement fund...

Huh? Most of 401(k) are managed by companies like Fidelity or Blackrock and offer variety of investment options, including index funds with fees as low as 0.02%.

Straw Man says

Huh? Most of 401(k) are managed by companies like Fidelity or Blackrock and offer variety of investment options, including index funds with fees as low as 0.02%.

Yep, but it's a company sponsored investment vehicle. And, as such, an employee is forced to either use their company's plan or else not participate.

The 401K fees are not the same as the mutual fund fees.

They are plan administration fees....

tatupu70 says

Yep, but it's a company sponsored investment vehicle. And, as such, an employee is forced to either use their company's plan or else not participate.

The 401K fees are not the same as the mutual fund fees.

They are plan administration fees....

Somebody responded to this post by thinking:
"Straightforward and irrefutable……..and yet I "Dislike" it."