Wednesday, October 17, 2012

WWYD- Husbands craptastic 401k plan - Early-Retirement.org

WWYD- Husbands craptastic 401k plan

Old Today, 04:19 PM ? #1

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WWYD- Husbands craptastic 401k plan


My husband works for a firm that is based in another state. He's the only employee in this state.
They offer a 401k to employees who have been there a year.
They offer a match of $1 for every $1 up to $1000/year.
That all sounds good.

Up till now, since he's worked for small firms, he's just been doing IRAs w/catchup... And I've born the brunt of the tax advantaged savings by maxing my 401k and catchup.

The problem with the 401k he's being offered - it's 100% full of load funds.
The loads vary from 5.75% (stock funds) to 3.75% (bond and/or money market funds.)

I think the $1k/year match is still worth it... And if he participates in the 401k, he can't do the IRA. So I told him to do $6k /year into the 401k, and any money left over can go into taxable savings (same as before.)

I suggested he put it in the bond fund - and I'll adjust my asset allocation to account for this 100% bond allocation on his side. I just can't see giving up 5.75 cents for every dollar to loads. It's bad enough giving up almost 3.75 cents/dollar.

Should we have just stayed with IRA?

FWIW - he's retiring in Jan 2014... so we only have to deal with this craptastic plan for 1 year.


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Old Today, 04:25 PM ? #2

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My husband works for a firm that is based in another state. He's the only employee in this state.
They offer a 401k to employees who have been there a year.
They offer a match of $1 for every $1 up to $1000/year.
That all sounds good.

Up till now, since he's worked for small firms, he's just been doing IRAs w/catchup... And I've born the brunt of the tax advantaged savings by maxing my 401k and catchup.

The problem with the 401k he's being offered - it's 100% full of load funds.
The loads vary from 5.75% (stock funds) to 3.75% (bond and/or money market funds.)

I think the $1k/year match is still worth it... And if he participates in the 401k, he can't do the IRA. So I told him to do $6k /year into the 401k, and any money left over can go into taxable savings (same as before.)

I suggested he put it in the bond fund - and I'll adjust my asset allocation to account for this 100% bond allocation on his side. I just can't see giving up 5.75 cents for every dollar to loads. It's bad enough giving up almost 3.75 cents/dollar.

Should we have just stayed with IRA?

FWIW - he's retiring in Jan 2014... so we only have to deal with this craptastic plan for 1 year.

Crapastic! What a great word. Very descriptive.

Even though you are paying excessive fees, for the $1000 you put in you get an immediate additional $885 - the employer match minus all the fees. Grit your teeth and do it. When he leaves, roll it over into an IRA.


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Old Today, 04:36 PM ? #3

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Actually our plan is to have him put $6000 in. That's what would go into an IRA. He isn't allowed to do both a traditional IRA and a 401k.

His employer is relatively small - around 50 people. But they're all highly educated... you'd think they'd want to avoid the fees. Not sure if it's possible to get a no-load 401k plan set up for 50 employees or less.

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Old Today, 05:42 PM ? #8

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Hmm. I thought we were above the income caps for Roth. That turbo tax calculator suggests other wise.

Off to go read some more.

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