Anyone elses 401k suck this bad?

[lothar]

No, it's not complete shit. For your company to offer funds at those expense levels they have to pay massive participant based record-keeping fees. That's fine, and it certainly is a best-case scenario for the plan participants, but not every company (or even state) can afford to do that.

Not sure, but it sounds like he doesn't have control over asset allocation.

Look at the fact sheets, they are not registered funds and therefore do not have NASDAQ ticker symbols. If you want an approximation of the fund strategy, you can look at the closest equivalent mutual fund offered by the investment management firm, (or firms in this case) but remember that these assets are not comingled with the mutual fund, they are managed in a separate sleeve.

The fact that there's little to no information about the funds, their "top 10 holdings"(I see a top 5 on some of them, and others show nothing) or it's performance and they're charging high expense ratios for that is what makes it crap. Like giving your money to a blind man who says "trust us" without showing anything.
A lot of the funds seem to give "benchmark" performance(meaning whatever they're comparing the funds with), but they don't give their own. What's the point of giving "benchmark" performance if there's nothing to compare it to? D:

Even most hedge funds which participate in much more types of investments this SMA does and even more gives out performance figures.

So the only thing he can do is set his meter to "aggressive" or "moderate", and they choose the percent allocation in each fund for him? If you need another reason why it's crap, there's another one.

 

[lothar]

Yes, many other 401Ks are that bad (actually many are far worse). 401Ks are generally very limited selections with generally mid to high fees. That is why the standard rule-of-thumb is to do this:

1) Put as much into the 401K as needed to get the full company match.
2) Stop putting money into the 401K.
3) Put any additional retirement funds into a Roth IRA or Traditional IRA until that IRA is maxed.
4) Decide if you still need more retirement funds.
5) If so, go back to the 401K. If not, open a taxable investment account.

Yes, you can do better somewhere else with your own money, but you could also do worse. Part of it is how educated you are and part of it is luck.

OP, just follow Dullard's advice.
1.) In your case, put zero, since you still get the 5.5% salary match anyway.
2.) Stop and go to Step 3.
3.) Open a Roth IRA account and contribute the $5k maximum.
4.) Does your plan match your contributions or they only do the 5.5% of your salary and that's it? If so, add more to your plan. If not, skip that and open a taxable investment account with Vanguard and buy their index funds.

I don't believe in "target retirement funds", but if you do, that's okay. Nothing wrong with that.
I'd rather have the flexibility in choosing how much cash, equities, and income for myself, but I understand some people don't have the time nor intrest to learn about investments.

 

[Scarpozzi]

I'm 28 now and will retire at 58, at least that's when my pension will kick in but I won't touch my 401k yet obviously.

I'm almost 30. I've got a 401k and pension through my work (also government). My advice to you is to have patience. Retirement investments aren't get rich quick schemes. If you have options to invest in different funds within the 401k, you can make educated decisions. If they have a target fund setup for you, it's probably the easiest way to go as they'll adjust the risk of your portfolio to match best practices for your target date.

Right now, 50% of my retirement is in higher risk investments. I love it when the market tanks because I know those are the months that my money is able to buy more stock. Remember that your earnings are cumulative, so there will be a point when you start noticing that you're accounts are earning money faster...even if you are contributing the same amount.

If you feel that you aren't going to have enough in the end, start contributing on your own. Talk to your employer about a tax deferred 457 or a 403b account if you want to contribute to a market account. I do business with ING, but TIAACREF and other companies are just as good.

 

[Blackjack200]

The fact that there's little to no information about the funds, their "top 10 holdings"(I see a top 5 on some of them, and others show nothing) or it's performance and they're charging high expense ratios for that is what makes it crap. Like giving your money to a blind man who says "trust us" without showing anything.
A lot of the funds seem to give "benchmark" performance(meaning whatever they're comparing the funds with), but they don't give their own. What's the point of giving "benchmark" performance if there's nothing to compare it to? D:

No, it doesn't. I'm not going to do a fee analysis, but since you keep suggesting the fees are high, why don't you post up some comparable actively managed 40-act funds that are signifigantly cheaper? As I said before, usually the reason that the SMAs don't show performance history is because they don't have them. If you're really that curious I'm sure you can call Pru and they'll tell you all about it.

They publish benchmark figures so that the participants will at least have some idea of the performance profile of the asset catagory.

Even most hedge funds which participate in much more types of investments this SMA does and even more gives out performance figures.

Show me a hedge fund that was started up last year and publishes 1-3-5-10 year performance figures. Also, show me a hedge fund that publishes any of their holdings.

So the only thing he can do is set his meter to "aggressive" or "moderate", and they choose the percent allocation in each fund for him? If you need another reason why it's crap, there's another one.

I really don't think you understand how managed money works at the institutional level. This is not a brokerage account where fees, investment flexibility, and information are generally the most important considerations, this is a pension platform that's designed to limit investment flexibility to prevent its participants from making bad decisions.

If a participant feels that he/she is a more sophisticated investor and can do better on their own, they should absoloutely only contribute up to the match and take the balance of their assets into an IRA.

 

[OutHouse]

mine sucks,

Jan-25-2010 Jun-25-2010 -3.17%


I may as well be putting my 15% contribution into a savings account.

 

[lothar]

No, it doesn't. I'm not going to do a fee analysis, but since you keep suggesting the fees are high, why don't you post up some comparable actively managed 40-act funds that are signifigantly cheaper? As I said before, usually the reason that the SMAs don't show performance history is because they don't have them. If you're really that curious I'm sure you can call Pru and they'll tell you all about it.

I really don't think you understand how managed money works at the institutional level. This is not a brokerage account where fees, investment flexibility, and information are generally the most important considerations, this is a pension platform that's designed to limit investment flexibility to prevent its participants from making bad decisions.

If a participant feels that he/she is a more sophisticated investor and can do better on their own, they should absoloutely only contribute up to the match and take the balance of their assets into an IRA.

Why must it be "actively" managed?

Okay, so you're saying the SMA was setup last year and can't publish the 1/3/5 year performance figures because they haven't been there yet?
Your earlier post made it seem like it's something they can't do period regardless of how old they are or something...So in 1/3/5 years, Boomhower should be able to see the performance figures then?

If that's really the purpose, then shouldn't the company/pension plan have done their own research to find out that ~85% of actively managed funds don't beat the S&P 500 index?

 

[rcpratt]

My 401k has 0.1% return for the calendar year.

But I only first contributed to it two weeks ago

 

[boomhower]

What? I've never heard of this.

You can look it up. In NC employers are required to contribute to sworn officers 401k. The city talked out cutting out 401k contributions last year when money got tight but they couldn't drop ours, they have to do it.

 

[Blackjack200]

Why must it be "actively" managed?

Because you want to do an apples to apples comparison. No one disputes that a passively managed product would be cheaper than an actively managed product.

Okay, so you're saying the SMA was setup last year and can't publish the 1/3/5 year performance figures because they haven't been there yet?
Your earlier post made it seem like it's something they can't do period regardless of how old they are or something...So in 1/3/5 years, Boomhower should be able to see the performance figures then?

Yes, looking back my post was a bit unclear. The nature of SMAs is that each one is a separate sleeve. So when a plan sets up an SMA, it won't have a performance history. I agree that it's a disadvantage, but it's not a situation where the information is there but not being provided to the participants.

If that's really the purpose, then shouldn't the company/pension plan have done their own research to find out that ~85% of actively managed funds don't beat the S&P 500 index?

I share your philosophy on investing and am a believer in index funds, but there are legitimate criticisms of the index industry and legitimate reasons why a multi billion dollar pension fund would be wary of taking huge positions in these funds. When you have a bubble in a certain sector (like tech 10 years ago or recently real estate) comanies in that sector can grow to a disproportionately large proportion of the index. Ideally, an active manager who is stricly limited in how much assets he can allocate to any single sector can avoid these situations and deliver lower volatility/increased liquidity to their clients.

Now, I think we both know that it doesn't always work out that way, but plan sponsors have become very sophisticated in recent years about reviewing the investment managers in their plans and firing the ones that are taking on too much risk.

TL/DR: I like index funds too, but active products also have their place.

 

[JMapleton]

It's not a government managed investment.

https://www.retirement.prudential.com/RSO/web/pdf/NC_FIFSA.pdf
https://www.retirement.prudential.com/RSO/web/pdf/NC_GEFSA.pdf

It's discretionary asset management provided by traditional IM firms. It's just branded as an NC fund for some reason. There's absolutely nothing wrong with this type of investment vehicle. In fact, many of our biggest clients (> $1 billion in plan assets) insist on using separately managed accounts for all their asset categories. They use them because of cost concerns and fee transparency.

If the government of NC approved it, it's government managed. No doubt it was reviewed and adheres to a certain standard that a group of government officials "approved" of.

 

[Blackjack200]

If the government of NC approved it, it's government managed. No doubt it was reviewed and adheres to a certain standard that a group of government officials "approved" of.

Oh ok, so since the SEC (A government agency) "approves" mutual funds under the Investment Company Act of 1940, every single mutual fund is Government managed.

 

[lothar]

I share your philosophy on investing and am a believer in index funds, but there are legitimate criticisms of the index industry and legitimate reasons why a multi billion dollar pension fund would be wary of taking huge positions in these funds. When you have a bubble in a certain sector (like tech 10 years ago or recently real estate) comanies in that sector can grow to a disproportionately large proportion of the index. Ideally, an active manager who is stricly limited in how much assets he can allocate to any single sector can avoid these situations and deliver lower volatility/increased liquidity to their clients.

Now, I think we both know that it doesn't always work out that way, but plan sponsors have become very sophisticated in recent years about reviewing the investment managers in their plans and firing the ones that are taking on too much risk.

TL/DR: I like index funds too, but active products also have their place.

You're a bit off on my opinions.
Index funds are a waste of time for people who know what they're doing. For people who have no idea(95+% of the people out there), they're excellent.
I have 2 actively managed funds(FAIRX and OAKBX). They both share my investment philosophy and have the numbers to back them up.

In conclusion:
Actively managed funds run by Bruce Berkowitz(FAIRX), or OAKBX fund people >>>>> Index funds >>>>> some stupid manager I know nothing about running an actively managed fund.

The only index funds I have are in my 401k. Everything else(my IRA and other investment accounts) is either strictly FAIRX, OAKBX, cash, or my own stocks(the majority).

Seth Klarman has a section in his book called "Margin of Safety" about index funds. It's an interesting read.

 

[fire400]

fvck 401k, it's going to inflate anyway..

don't know why after the recession and bad financing... why anyone would trust the 401k system anymore.

my sister pulled out her 401k right before the recession just to pay for her mortgage, and she felt pretty bad. and then... people's 401k's were getting fvcked anyway. she works in financing, and I'm sure 'now' she doesn't feel bad about having had to pull her 401k

 

[Zebo]

As a government employee I am enrolled in the states 401k plan. What sucks is that they took away you options to choose your own funds outside of what they offer. I don't know enough about this stuff to tell heads or tales of what the different finds mean. Basically I have it set on my retirement date and it rebalances quarterly accordingly getting safer as time goes on.

The good news is that I don't have to contribute to this. My employer is required by state statute to contribute ~5.5% of my salary. So I can take the 6% I am contributing elsewhere. I need to start looking at other options that don't take much to enroll. Thoughts or ideas?

Yeah GTFO of that system and go work for a place that has a defined benefit plan. e.g. 75-100% of you last years pay.

I also had a scam like this when working for state years ago. Put about 66K in and it's worth about 44K now. Jerks won't let me move it to a self directed fund/stock and only have like 10 funds to choose from, eerily similar to your descriptions. That was for about 6 years work and I get basically one years survival pay at 59. My friends who got pers get that or more every year for the rest of their life, 30-40 years after retirement.. But I was 'professional' and got hosed with something called a 403b. Lucky I got out and planned other things or I'd be seriously worried.

 

[boomhower]

Yeah GTFO of that system and go work for a place that has a defined benefit plan. e.g. 75-100% of you last years pay.

I also had a scam like this when working for state years ago. Put about 66K in and it's worth about 44K now. Jerks won't let me move it to a self directed fund/stock and only have like 10 funds to choose from, eerily similar to your descriptions. That was for about 6 years work and I get basically one years survival pay at 59. My friends who got pers get that or more every year for the rest of their life, 30-40 years after retirement.. But I was 'professional' and got hosed with something called a 403b. Lucky I got out and planned other things or I'd be seriously worried.

It does have a defined benefit plan. In addition to the 401k I get a full pension. If you read through the thread it turns out this actually isn't that bad. So far this year it's up ~5.3% and once dug into I could certainly have worse options, albeit most definitely could have better.

 

[JMapleton]

Oh ok, so since the SEC (A government agency) "approves" mutual funds under the Investment Company Act of 1940, every single mutual fund is Government managed.

Effectively, that's why most mutual funds do not beat the S&P average, which is something that should be very easy. The government requires them to be over diversified and restricts certain types of investments.

 

[ultimatebob]

That's still better than the piece of shit my employer calls their 401k... they only match 20% for the first 4% of my income, and even that puny match takes 5 years to become fully vested.

Needless to say, I have my own IRA set up to insure that I can actually retire someday.

 

[Blackjack200]

Effectively, that's why most mutual funds do not beat the S&P average, which is something that should be very easy. The government requires them to be over diversified and restricts certain types of investments.

Tell me which regulations you are referring to, because I am not familiar with them.

 

[Jadow]

you have quite a few index funds which is nice. You could do worse.

 

[Blackjack200]

You're a bit off on my opinions.
Index funds are a waste of time for people who know what they're doing. For people who have no idea(95+% of the people out there), they're excellent.
I have 2 actively managed funds(FAIRX and OAKBX). They both share my investment philosophy and have the numbers to back them up.


In conclusion:
Actively managed funds run by Bruce Berkowitz(FAIRX), or OAKBX fund people >>>>> Index funds >>>>> some stupid manager I know nothing about running an actively managed fund.

The only index funds I have are in my 401k. Everything else(my IRA and other investment accounts) is either strictly FAIRX, OAKBX, cash, or my own stocks(the majority).

Seth Klarman has a section in his book called "Margin of Safety" about index funds. It's an interesting read.

Never heard of Fairholme, looks like he does a pretty good job with $14 billion. But I wonder if he'd be able to replicate his performance with the $140 billion that Growth Fund of America manages.

I know the 401(k) guys at Natixis (Natixis owns Oakmark), but almost everyone on our platform chooses Pimco for fixed income.