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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 of
by paxys 1y 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%.
- alright2565 1y agoWith 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!
- paxys 1y agoCompound it over 30+ years and even those few bps add up to a significant amount.
- dangus 1y agoNot 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.
- paxys 1y agoThe question was - I don't understand why people keep money in their old 401k accounts. The answer is - there are situations where it is favorable to do so. It may or may not be favorable for you, and it may or may not be favorable for the median person. But these situations exist. And everyone can check for themselves and make the best decision insted of arguing over a blanket "X is better" or "Y doesn't make sense".
- dangus 1y agoSure, I agree with that general sentiment, but I think there’s probably a ~90% chance that you should rollover somewhere else.
- specialp 1y agoThe 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-lawsuits-proliferate-in-2024/ https://hallbenefitslaw.com/401k-excessive-fee-class-action-...
- dangus 1y agoUsually when you leave the company they start charging a quarterly service fee. Be careful out there.
- datadrivenangel 1y agoNot all of them due, which is why I was so surprised to get dinged by this!