this post was submitted on 25 Oct 2023
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Sure, some suck, and I've had a really crappy plan before, but most people have decent options in their plan. I think my current plan is pretty average:
There's a ton of expensive funds, but I'm basically at 0.20% net fees, which is acceptable. Anything under 0.50% is good enough imo.
ours go over 1% on some. that being said I choose the fund with the lowest fee that still invests broadly but non of mine are that low without investing in like treasuries. so at my work the one im in is like .33
0.33% is pretty decent, though nothing to write home about. At one employer, my cheapest fund was an S&P fund that cost 0.80%-ish.
There are rules in place to prevent employers from only putting in crappy, expensive options, and that seems to have solved most of the problem.
the fund fees are not even the ones I am complaining about though. t row price, century, and the other high muckity muck ones they use have account fees. Again the employer usually pays them but once you leave you have to get those transferred out right away. A process I enjoy right up there with doing taxes.
You can't really talk about one without the other though. My worst 401k had no separate admin fees, they just baked them in to the fund fees. My current 401k separates them. Some employers eat the cost so employees only pay fund fees.
The important number at the end of the day is the total fees you pay. I pay about 0.15-20% total for the funds+asset fees, which is pretty decent. It's not as good as my IRA (about 0.05% for equivalent funds), but I also can't invest as much in my IRA as my 401k, so I have a tax incentive to contribute beyond the 401k match. If my combined fees were high enough, the tax incentive wouldn't be enough and I'd just invest in a regular, taxable brokerage account.
That really depends on the 401k. Some are very competitive to IRAs in terms of total fees, even if you aren't employed.
But yes, transferring a 401k is more of a pain than it should be. It's not that hard though, usually it's just:
The whole process is about 20 min of effort and takes 2-3 weeks. It should be easier, but it could also be way worse.
Thing with the process outlined is its if it all goes smoothly and it really glosses over the paperwork and followup needed. Its a pita and 20 min is never the amount of time it takes from me. Account fees are way worse than me than the fund fees as they are above and beyond and regardless of any gain or loss happening to your investments.
What paperwork do you need to fill out?
For me, it has really been just that. Here was my most recent process:
I've never bothered with 401k to 401k, so maybe that process is more complicated.
I mean I have not done it in 4 years or so but its call one you want to transfer from and one you are transfering to to see what their prefered method is. Sometimes it will conflict. Get the forms they ask you to use. fill them out and fax or if your lucky email them or if your really unlucky mail them. wait and check back and if your lucky it all goes through. if your unlucky find out something was not filled out right and have to redo it. Might have to fill out a change of name if your name is different on one of the things which is common because your workplace made the one and you made the other. Remember these are retirement accounts. I have no idea where you are with these typical super awesome low fee options and the ability to just phone it in. I have done this at least three times now and its never been my experience.
I wonder if it's a difference in the industries we work in. My worst experience was with a small company (<50 people), which had crappy fees (like 0.80% for an S&P 500 fund), and my current company is mid/large (something like 3000 employees, and like 90% of that is in our mfg plants; 0.10% asset fee, and the funds I picked have <0.10% fees each). I've also done HSA trustee transfers and IRA rollovers at a variety of HSA orgs, and that has been relatively painless (in fact, I do an HSA trustee transfer about 4x/year).
If you pick a good custodian to receive your funds, you solve half the problem.
I mean I like my custodians and they never seem to be the pain in the but part. except for the name thing when it occurs. My worst one is one im stuck with from working at a public university where you have to continue with their person as there is a small, probably not worth it realy, health benefit that I lose if I move it out. So my account basically just shrinks slowly. Its like im paying some sort of long time insurance.