For four decades, patient savers able to grit their teeth through bubbles, crashes and geopolitical upheaval won the money game. But the formula of building a nest egg by rebalancing a standard mix of stocks and bonds isn’t going to work nearly as well as it has.
with 401k your locked into the options your employer gives so they have never been great.
The first part is true, but most people have decent options on their 401k. Usually there’s an S&P 500 fund with a low expense ratio (<0.10%), and often an international fund with competitive fees (<0.20%). They usually also have expensive funds, so don’t pick those and instead pick the lower cost index funds. If your desired split is expensive in your 401k, you can balance it in your other investment accounts like an IRA.
They tend to have to high a fees although the business often pays those but man when you leave its like a race to get that move over.
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.