4 ms·

Eh, after fees most standard 401Ks are only marginally better than a bank account at this point.

by parrellel 7y ago

nradov 7y ago
Due to compound returns, a marginal advantage makes a huge difference over a 40 year career.
- parrellel 7y ago
  You'd hope, but a number of smaller plans have that entire advantage eaten, so you end up with no growth. Getting out of a lot of 401K plans and into something like an IRA is... advisable in many cases. I'll admit that this is mostly a problem for small businesses, from what I read, and there are plenty of 401k's that aren't actively screwing people.
sparkpy724 7y ago
I don' think you have the slightest idea what you are talking about. Almost all my 401K funds charge less than 1% a year and if you're in mostly equities you average 10% returns per year. Most bank accounts offer less than 1% Interest rates on deposits so its really not even close.
walshemj 7y ago
A 401k wont be invested 100% in cash
stale2002 7y ago
This is not true at all. It is very easy to get some sort of vanguard s&p 500 index fund that will get you %7 return rates, with something like .1% fees.
buttcoinslol 7y ago
I doubt 1%+ expense ratio funds across the board is the average case, but I could be wrong. Perhaps if you let your 401k provider manage your money. In my 401k, I pay 1.5 bps/yr on 80% of my portfolio, a Fidelity S&P 500 fund (FXAIX), or $0.15 per $1,000 per year. My other two funds are a Fidelity Small-Cap and Fidelity Mid-Cap funds (FSSNX and FSMDX), I pay 2.5 bps/yr on the other 20% between these two funds, or $0.25 per $1,000 per year. If my balance was $100,000 right now, I would pay 80x0.15+20x0.25, or about $17/year for each $100k. $170 per million, and so on. These 401k mutual funds have better expense ratios than my Roth IRA holding, VTI (Total Market ETF), which is at 3 bps/yr, and the mutual fund couterpart of VTI, VTSAX is 4 bps. There is absolutely no possible way for a high-yield savings acct that yields (Fed Funds rate minus 15-25 bps) in interest (Goldman's marcus.com pays 2.23% APY, for instance, fed funds is ~2.40%) will ever approach my portfolio after 40 years of returns, barring total societal collapse.

Eh, after fees most standard 401Ks are only marginally better than a bank account at this point.

nradov 7y ago

Due to compound returns, a marginal advantage makes a huge difference over a 40 year career.

parrellel 7y ago
You'd hope, but a number of smaller plans have that entire advantage eaten, so you end up with no growth. Getting out of a lot of 401K plans and into something like an IRA is... advisable in many cases. I'll admit that this is mostly a problem for small businesses, from what I read, and there are plenty of 401k's that aren't actively screwing people.

sparkpy724 7y ago

I don' think you have the slightest idea what you are talking about. Almost all my 401K funds charge less than 1% a year and if you're in mostly equities you average 10% returns per year. Most bank accounts offer less than 1% Interest rates on deposits so its really not even close.

walshemj 7y ago

A 401k wont be invested 100% in cash

stale2002 7y ago

This is not true at all. It is very easy to get some sort of vanguard s&p 500 index fund that will get you %7 return rates, with something like .1% fees.

buttcoinslol 7y ago

I doubt 1%+ expense ratio funds across the board is the average case, but I could be wrong. Perhaps if you let your 401k provider manage your money. In my 401k, I pay 1.5 bps/yr on 80% of my portfolio, a Fidelity S&P 500 fund (FXAIX), or $0.15 per $1,000 per year. My other two funds are a Fidelity Small-Cap and Fidelity Mid-Cap funds (FSSNX and FSMDX), I pay 2.5 bps/yr on the other 20% between these two funds, or $0.25 per $1,000 per year. If my balance was $100,000 right now, I would pay 80x0.15+20x0.25, or about $17/year for each $100k. $170 per million, and so on. These 401k mutual funds have better expense ratios than my Roth IRA holding, VTI (Total Market ETF), which is at 3 bps/yr, and the mutual fund couterpart of VTI, VTSAX is 4 bps. There is absolutely no possible way for a high-yield savings acct that yields (Fed Funds rate minus 15-25 bps) in interest (Goldman's marcus.com pays 2.23% APY, for instance, fed funds is ~2.40%) will ever approach my portfolio after 40 years of returns, barring total societal collapse.