Comment by paxys
5 days ago
If you work for a large company it is possible that they have negotiated better pricing for their 401k plan than what Vanguard or some other brokerage offers off the shelf. For example Vanguard charges 0.08% for its target date retirement funds, but the one I get on my old employer's plan (BlackRock LifePath) is just 0.037%. And the retail price for that LifePath fund is a whopping 0.17%.
With how low fees have gotten, I think the more likely and more damaging situation is that where people's employers have negotiated much worse pricing for their captive audience. I wouldn't give 0.08% vs 0.037% a second thought any day. That's only difference of $400/yr on $1M!
The real mover for lower retirement plan fees was lawsuits. There have been loads of 401k excessive fee class action lawsuits and this got almost every employer negotiating to avoid this. Of course there's some plausible deniability in some cases but there is something on the other side against that https://hallbenefitslaw.com/401k-excessive-fee-class-action-...
Compound it over 30+ years and even those few bps add up to a significant amount.
Not really. If you start with a million dollars it’s adding $400 a year and compounding beyond that. But the median person doesn’t have that much in their portfolio…well, ever.
For most people micromanaging below 0.01% is like gaining a cup of coffee every year.
2 replies →
Usually when you leave the company they start charging a quarterly service fee. Be careful out there.
Not all of them due, which is why I was so surprised to get dinged by this!