Comments on: 401k Performance – 5 Tips to Turbo-Charge It Now http://wealthpilgrim.com/401k-performance-%e2%80%93-5-tips-to-turbo-charge-it-now/ WealthPilgrim.com -No Money Worries. No Matter What. Tue, 15 May 2012 03:52:59 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Ronald Dodge http://wealthpilgrim.com/401k-performance-%e2%80%93-5-tips-to-turbo-charge-it-now/#comment-9712 Ronald Dodge Fri, 03 Dec 2010 00:05:19 +0000 http://wealthpilgrim.com/?p=15766#comment-9712 BTW, a $5,000 contribution into a ROTH IRA is of a better value than $5,000 contribution into a Traditional IRA given the tax treatment difference between the 2, but yet, both have the same contribution limit. The only thing is, if you are at a too high of an income to make a ROTH IRA contribution, then you may have to go with Traditional IRA (Tax deductible or not depending on your tax situation), which is still better than the poor limited choices of a 401(k) plan. As for the employer's matching, I would only first put in just enough to max out that matching policy, but beyond that, max out the IRA before maxing out the 401(k) plan. BTW, a $5,000 contribution into a ROTH IRA is of a better value than $5,000 contribution into a Traditional IRA given the tax treatment difference between the 2, but yet, both have the same contribution limit. The only thing is, if you are at a too high of an income to make a ROTH IRA contribution, then you may have to go with Traditional IRA (Tax deductible or not depending on your tax situation), which is still better than the poor limited choices of a 401(k) plan.

As for the employer’s matching, I would only first put in just enough to max out that matching policy, but beyond that, max out the IRA before maxing out the 401(k) plan.

]]> By: Ronald Dodge http://wealthpilgrim.com/401k-performance-%e2%80%93-5-tips-to-turbo-charge-it-now/#comment-9711 Ronald Dodge Thu, 02 Dec 2010 23:56:17 +0000 http://wealthpilgrim.com/?p=15766#comment-9711 Hate to say it, but performance of 401(k) and Contributions into 401(k) are 2 different things. Yes, you make a valid point with the example that you really lose $9,000, not $2,000. I agree with you on that aspect, but performance of a 401(k) plan to me says is it doing what it is suppose to do and as for the funds that's in the 401(k) plan that we have, they have not been performing as needed. As such, I suspect that 2% lagging annually has been managerial expenses, which it's stated in the prospectus as 0.5% as such fee, so what happen to the other 1.5%? My suspicion is the idea they hid it by reducing the NAV as 12b fees, which they are legally allowed to do for operating expenses. For this to be supposedly an index fund, that's a really high expense rate. As a matter of fact, the funds been going all along with the markets through much of the year, but within the month of November, it suddenly dropped 2% point lower than the market drop. While I know there's such thing as index error, but to be constantly lagging from year to year by 2%, there's something to that. So what's better than the 401(k) plan you ask? Invest into a ROTH IRA and tax diversify your retirement funds. Not only that, but given we are at a very low tax rate now and expect to be in a very high tax rate in retirement years, that much more of a benefit to us then. Not only that, but ROTH IRA as the owner avoid the RMD rules all other retirement funds must follow. You also avoid the fees of such funds as you can do your own investments with a much greater flexibility and quite possibly at much lower total investment expenses. You don't entirely avoid investment expenses, but I would rather pay a small nominal transaction fee than to pay a certain percentage of my investments per year to some broker who I don't even get to know as is the case with the 401(k) plan. Hate to say it, but performance of 401(k) and Contributions into 401(k) are 2 different things. Yes, you make a valid point with the example that you really lose $9,000, not $2,000. I agree with you on that aspect, but performance of a 401(k) plan to me says is it doing what it is suppose to do and as for the funds that’s in the 401(k) plan that we have, they have not been performing as needed. As such, I suspect that 2% lagging annually has been managerial expenses, which it’s stated in the prospectus as 0.5% as such fee, so what happen to the other 1.5%? My suspicion is the idea they hid it by reducing the NAV as 12b fees, which they are legally allowed to do for operating expenses. For this to be supposedly an index fund, that’s a really high expense rate. As a matter of fact, the funds been going all along with the markets through much of the year, but within the month of November, it suddenly dropped 2% point lower than the market drop. While I know there’s such thing as index error, but to be constantly lagging from year to year by 2%, there’s something to that.

So what’s better than the 401(k) plan you ask? Invest into a ROTH IRA and tax diversify your retirement funds. Not only that, but given we are at a very low tax rate now and expect to be in a very high tax rate in retirement years, that much more of a benefit to us then. Not only that, but ROTH IRA as the owner avoid the RMD rules all other retirement funds must follow. You also avoid the fees of such funds as you can do your own investments with a much greater flexibility and quite possibly at much lower total investment expenses. You don’t entirely avoid investment expenses, but I would rather pay a small nominal transaction fee than to pay a certain percentage of my investments per year to some broker who I don’t even get to know as is the case with the 401(k) plan.

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