401k not growing - anyone else?

[SeductivePig]

Curious, is the market just not performing well this year?

I'm looking at my portfolio and have heard that many companies push funds that provide better commission to the person managing the company's 401k (and along with that come higher fees). Would it be possible to withdraw my balance and invest it into something like a low risk index fund and hold it over the long term? Something akin to vanguard?

 

[TwiceOver]

Withdrawing the funds would cost quite a bit in taxes. Can't you manage your own and put it into the funds you want?

 

[SeductivePig]

Withdrawing the funds would cost quite a bit in taxes. Can't you manage your own and put it into the funds you want?

I probably should have phrased it differently - what I meant was to roll my 401k into a personally managed retirement account, and choose an index fund as the area to invest.

Isn't that something people are eligible to do? I don't want to spend any of the money, just invest it on my own - thought there wouldn't be taxes that way.

 

[KB]

The market is about flat this year. You are hopefully getting dividends so you should have made something.

Transferring retirement funds is easy. Just log into vanguards website and they give you the option to do a 401k account rollover. Their website will ask you a few questions, like account numbers and such and then they will move your money over after a week or so. Typically it forces a selling of your current mutual funds to buy ones in the vanguard profile. If you have individual stocks then that gets a bit more complicated.

 

[Exterous]

This would depend on whether your provider\company allows in service rollovers and what the fee (if any) would be for doing that. Some 401k plans offer the ability to invest in ETFs. If thats an option you can often find low fee index fund options there

Does your company offer a match? If they do and they don't offer in service roll overs you may want to invest up to the match and then max out your IRA investments. After that you may want to look into the tax savings of lowering your AGI by continuing to invest in the 401k vs the reduction of fees\better fund options investing in a taxable account

 

[gorcorps]

401ks are for the long game

People who fiddle with it because of a single bad year don't do that well, because you're making a knee jerk reaction while your money is at a low point. You'd only be ahead if you moved it BEFORE this happened.

If you want to start adding your money to a different fund (which is what I did) then that's fine, but I wouldn't move your current funds while they're already down.

 

[Genx87]

Curious, is the market just not performing well this year?

I'm looking at my portfolio and have heard that many companies push funds that provide better commission to the person managing the company's 401k (and along with that come higher fees). Would it be possible to withdraw my balance and invest it into something like a low risk index fund and hold it over the long term? Something akin to vanguard?

Markets have been pretty stagnant for the past 12 months. I broke even last year and so far this year have broke even.

Look at your 401k options. There are some that allow self directed accounts. I would not take the money out of the 401k to invest personally. You will take I believe a 10% penalty on top of taxes.

 

[zinfamous]

Listen to Exterous.

Access your online 401k options and see if it is currently invested in a shitty, high-fee plan. If you are worried about it not growing (and this has been going on for some time), it probably has a higher percentage of bonds and annuities than is necessary. On top of that, this could be put into a highly-managed plan that has way too many fees attached to it.

Check the options (if you have options), and invest in a low-fee index fund if your main concern is growth. Depending on what your company allows, what investment companies they use, you might have an option for some low fee Indexes, through Vanguard or Fidelity. With my 403B, I can choose either TIAA or Fidelity. I went with TIAA, and on top of various TIAA options, including their own Index funds and the typical target retirement fund, I have a few Vanguard Index funds, including an institutional S&P 500 index with a 0.04 EXP ratio. ...so I put 100% contributions into that. I've had Fidelity at other institutions and they also offered a range of options, including Vanguard indexes which are generally 10x+ cheaper than others.

It would be stupid to invest out of your 401K if the company offers a match (free money is unbeatable). If the match is greater than the fees, reasonable or unreasonable, then it's very likely still a better investment.

I would be surprised if you can roll it over into a personal IRA if you are still employed at that company...but that would also likely be a poor idea. Just change the fund allocation if you can, contribute as much as you possibly can, and open up a separate IRA with Vanguard and put all of that yearly maximum contribution into another Index Fund.

remember: when the market is down, that is GOOD for you. Your money purchases more shares than they could before. If possible, this is when you want to increase contributions. The market only ever goes up in the long term.

 

[NesuD]

Curious, is the market just not performing well this year?

I'm looking at my portfolio and have heard that many companies push funds that provide better commission to the person managing the company's 401k (and along with that come higher fees). Would it be possible to withdraw my balance and invest it into something like a low risk index fund and hold it over the long term? Something akin to vanguard?

If you are anywhere near where you were this time last year then I wouldn't panic. The past 12 months have been pretty flat for the markets in general. This is how it goes some years not to good other years gangbusters. Research your funds and look at long term performance. If they have a history of good performance over the long term say 5 or more years then i would sit tight for now.

Exterous and Zin are dead on pay attention they know what they are talking about.

 

[zinfamous]

If you are anywhere near where you were this time last year then I wouldn't panic. The past 12 months have been pretty flat for the markets in general. This is how it goes some years not to good other years gangbusters. Research your funds and look at long term performance. If they have a history of good performance over the long term say 5 or more years then i would sit tight for now.

Also need to pay attention to the age of the funds...some very new funds that I have noticed popping up are showing 15% growth! over the lifetime of the fund, 11% and 7% over 2 and 5 year periods, etc. When compared to stalwarts like VTSAX (~6% lifetime, iirc), those look great! ...but these funds were also born middle of 2008. so, yeah 😀

VTSAX was also up 34% that year.

 

[DaveSimmons]

I probably should have phrased it differently - what I meant was to roll my 401k into a personally managed retirement account, and choose an index fund as the area to invest.

Isn't that something people are eligible to do? I don't want to spend any of the money, just invest it on my own - thought there wouldn't be taxes that way.

When you change jobs, you can roll over your 401k into a Rollover IRA at a company like Vanguard.com and put the money into low-expense index funds. It's not something you can do while still employed at the company.

What you can do is look at the funds offered in the 401k and pick index funds if they are offered. Be careful about "Target 20xx" funds -- the Vanguard ones are pure index funds but I think some other companies have actively managed funds in the mix.

You can also start an IRA somewhere on your own, but that is separate from your 401k contributions.

 

[TheGardener]

What are your plan options? No index funds?

 

[zinfamous]

OP--can you answer whether or not your 401k options actually allow...options? To summarize what most are saying here:

typical 401K options allow an array of choices for employees to pick different funds and ways to invest their contributions. First thing you need to do is check that account and look for "change my investments" or a link like that, and you should see a list of funds that you can freely move some or all of your money into, as well as change future contributions into those funds.

It seems that either you didn't realize this is possible, or already know that your plan doesn't allow it (for some reason). That is the absolute first thing you should do, because keeping it in your 401k, especially with an employer match, is the best thing you can possibly do.

What company handles your 401k? Fidelity, Schwab, Vanguard, etc?

 

[TallBill]

I just can't understand how people don't understand retirement investments.

 

[rcpratt]

Not a whole lot of movement this year, but still slightly positive. Doing just fine.

 

[TheGardener]

because keeping it in your 401k, especially with an employer match, is the best thing you can possibly do.

This could be great advice. If the employer match is not 100% immediately vested, then rolling over the 401k may mean a loss of part of the match. This assumes that the plan even allows rollovers for current employees.

I agree with those that say you can't look at just one year. It's a long term investment.

 

[edro]

What are the expense ratios of the funds you are invested in?
Many 401ks have very high expense ratios.
All of mine are 1.5%+ except 1 fund that tracks the S&P500, which is 0.32%.

 

[DaveSimmons]

What are the expense ratios of the funds you are invested in?
Many 401ks have very high expense ratios.
All of mine are 1.5%+ except 1 fund that tracks the S&P500, which is 0.32%.

Good point, even with index funds you need to look at the expense %. If I had that 401k I'd put 100% into the S&P500 fund and get diversity (small-cap US, non-US stocks) through a separate IRA.

 

[dullard]

The advice given by posters above is spot on. I just want to back it up.

1) 401k investments often suck (limited choices and often high fees) unless you work at a very large company. Put money in the 401k to get the full match by your employer then put the rest of money you want to invest into other types of accounts. Suppose your company matches up to $5000. Then instead of putting $8000 in your 401k, put $5000 in the 401k and $3000 somewhere else like a Roth IRA. Then YOU have the full freedom to invest in anything at any expense ratio.

2) The 401k balance being flat is a good thing until you are about to retire. Assuming retirement is a long way off, be very glad that the 401k balance is staying low. Would you rather buy a car for $20k or the same exact car for $40k? Clearly you want the $20k car. Thus, since you are still buying funds in your 401k you want the lower price (which means a lower balance for you).

3) Not many companies will let you take money out of the 401k and invest it in other locations while you still work there.

4) For the limited options your 401k actually allows, look very carefully at the expenses. At my company and my wife's company they offer two versions of everything: one with a low fee and one with a high fee. The two options invest in basically the same stocks. Guess which one is better.

 

[zinfamous]

What are the expense ratios of the funds you are invested in?
Many 401ks have very high expense ratios.
All of mine are 1.5%+ except 1 fund that tracks the S&P500, which is 0.32%.

Dang, that's "high." Fidelity? I eventually rolled my old Fidelity 403b's into my current Vanguard IRA, but even in those employee Fidelity options I had a Fidelity index that had an exp ratio of 0.32, but also a Vanguard with 0.09%.

 

[dr150]

Curious, is the market just not performing well this year?

I'm looking at my portfolio and have heard that many companies push funds that provide better commission to the person managing the company's 401k (and along with that come higher fees). Would it be possible to withdraw my balance and invest it into something like a low risk index fund and hold it over the long term? Something akin to vanguard?

I do exactly that. My wife's 401k uses Fidelity. We just program it to leave some money into a cheap S&P500 fund (.05% fee) available in our 401k menu list and the rest of the money gets auto-transferred into Fidelity's brokerage type account and is programmed to auto purchase some funds there.

Fidelity doesn't allow an auto-purchase of ETFs--only mutual funds. BUT, it can put that money into CASH (no auto purchase programmed) and then you can buy ETFs manually (hopefully you have free ETF purchase options, otherwise trading fees will eat into your money). That's a chore though having to do a manual purchase every two weeks. I stick with some of their 5* rated funds.

Your plan almost certainly has a similar scheme and maybe even an auto-purchase function for ETFs.

 

[Drako]

Dang, that's "high." Fidelity? I eventually rolled my old Fidelity 403b's into my current Vanguard IRA, but even in those employee Fidelity options I had a Fidelity index that had an exp ratio of 0.32, but also a Vanguard with 0.09%.

What Fidelity Index fund did you have?

I've got FUSVX, and it's got a 0.07% ER gross.

 

[zinfamous]

What Fidelity Index fund did you have?

I've got FUSVX, and it's got a 0.07% ER gross.

I don't recall, as I moved all of that money out. All of my money in that Fidelity 403 was invested in a blend of 3 funds--2 fidelity large and mid cap funds and 1 Vanguard Index fund. Each Fidelity was at 0.32 or so.

That was also a long-ignored plan at an institution where I hadn't worked for about 9 years when I recently looked at them. Much of this was just magical numbers tomfoolery that I felt comfortable ignoring for a very long time....as I had a few of these scattered in various places. Now they are all rolled over into my own IRA or consolidated into my current employer plan. EDIT: I probably did have better options for Fidelity index funds in that plan, but by the time I started learning the basics about this stuff, I had already decided that I was going to rolling those funds out into my own IRA or into my current employer plan. While I reinvested within other plans, I left the Fidelity stuff invested that way because I was going to roll it over very soon.

At the time, I just trusted that "low" meant "low." When going back and comparing those "low" fees within Fidelity, Fidelity defined "low" with those indexes as the same "low" with the Vanguard, which was more than 1/10th lower. crazy....not that 0.3 isn't low. But it's practically gargantuan compared to Vanguard's typical offerings.

Currently, I'm at University of Maryland and GF is at Georgetown. I don't have the option for Vanguard, but I can pick Vanguard funds through TIAA, so I have 97% of that in an institutional version of VINIX @ 0.06 (rest 3% in index bond fund), which makes me happy (Very close to Admiral class without needing that minimum balance). GF has the option for Vanguard directly, and among her choices is VTSAX with institutional shares ($3 mill minimum investment for individuals). So she gets an exp ration of 0.04, beating the typical 0.05 for VTSAX, with no minimum. I know this is silly, but I am a bit jealous of her 0.04 (I hold VTSAX in my IRA).

 

[Exterous]

It's not something you can do while still employed at the company.

That's not entirely true. Some do let you do in service roll overs into another retirement account. From what I have seen they tend to be date limited though (as in 1 roll over allowed per year) and sometimes come with fees

What Fidelity Index fund did you have?

I've got FUSVX, and it's got a 0.07% ER gross.

You're probably only paying 0.05 ER for as long as they plan on keeping their fee waiver in place. Since VFIAX is 0.05 Gross and Net and a common Fidelity plan core offering I don't see that changing anytime soon. (But who knows)

 

[Brovane]

Personally my 401k is down this year, the only reason my balance has gone up is I have put in more than I lost. My 1-year return is -2.4% but my 5-year return is 8.6%. I am 100% invested in stocks so I expect that my 401k will have down years. However I am in for the long haul.