Proposal to move ex-employer 401k funds from fidelity to voya

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alaska1986
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Proposal to move ex-employer 401k funds from fidelity to voya

Post by alaska1986 »

First off i want to start by saying thank you all for providing some of the best free investment advice on the net. I would like to get some input on a proposal i was given by an allstate financial person to move ex employer 401k funds to ira, it has me thinking about actively managed funds and their expenses vs additional growth potential. On a side note i had read on this forum that once you get above $100-200k mark in your 401k you should start diversifying your portfolio a bit more and incorporating things like growth funds etc although that in itself doesnt mean you have to leave a passively managed account.

So i left my employer april 2021 and left my 401k funds (including yearly aftertax roth ira rollovers) with fidelity mostly because of the vanguard institutional shares. Below are the positions. I'd like your input on

Me:Age 35, salary 110k-120k range
Wife: age 30, 40k salary (will be attending school soon)
Side note: looking to start family soon

Fidelity(funds from rolling out aftertax money from plan to roth ira each year):
Roth ira $115k
Fsggx - global ex us fund $34,800 .06%er
Fskax - total market index $55,300 .02%er

Ex employer 401k - $240k ($91k roth, $149k pretax)
Fxnax - fidelity us bond index $46,400 .32%er
Vfwsx- ftse all word ex us index institutional $21,600 .08%er
Vieix- extended market index institutional $34,200 .05%er
Vinix- institutional index $137,500 .035%er

My CURRENT employer 401k holdings
Principal $13k
Fidelity us bond index fxnax .32%er $1300
Fidelity 500 index fxaix .015%er $7k
Fidelity extended mkt fsmax .035%er $1700
Fidelity total intl ftihx .06%er $3200

CURRENT Wife holdings
Roth 401k etrade $27k vtsax total stock market admiral share .04%er
Roth ira vanguard $8k vtiax total intl stock index admiral .11% er
Traditional ira vanguard $13k
Vbtlx $3k bond market index admiral
Vtsax $10k


PROPOSED MOVE
my $208k roth rollover voya .5% annual recording keeping
Growth portfolio
Aegfx-american funds europacific growth .84%er
Bhsrx- blackrock health science 1.44%er
Csiex- calvert equity .94%er
Sgtrx- columbia seligman global tech 1.56% er
Kaufx- federated hermes kaufmann 1.97%er
Fkdnx-franklin dynatech .85%er
Lgmax-loomis sayles global allocation 1.15%er
Itrax- t rowe price capital appreciation 1.24%er

my $150k traditional rollover
Voya select advantage ira .5%annual recordkeeping fee
Same 8 funds as above in growth portfolio

Wife $13k traditional & $35k roth ira rollover
Voya select advantage ira .6% recordkeeping fee
Same 8 funds as above in growth portfolio

Would appreciate any thoughts on this proposal and general thoughts on paying more fees for more growth potential. I'm aware that many index funds outperform many actively managed funds but I'm sure there are instances where the growth of actively managed funds outweighs the fees and I'm curious to here more on that.
Thanks!
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David Jay
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by David Jay »

alaska1986 wrote: Sun Oct 17, 2021 8:20 amWould appreciate any thoughts on this proposal and general thoughts on paying more fees for more growth potential. I'm aware that many index funds outperform many actively managed funds but I'm sure there are instances where the growth of actively managed funds outweighs the fees and I'm curious to here more on that.
Thanks!
Ouch. This is just evil. This plan will serve to transfer your assets to Voya.

You will underperform, there is no way that these actively managed funds can overcome the drag of nearly 2% per year over the long haul.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
humblecoder
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by humblecoder »

First, I didn't do the exact math, but your current asset allocation is around 10-15% bond. However, the proposed plan seems to be 0% bond. Is that what you intend? What is your risk tolerance?

Second, the fund proposed appear to be concentrated in different sectors (health science, tech, "europacific" whatever that means). Is it your intention to concentrate all of your holdings into these few sectors?

Third, not only are the fund expenses super high, but they are charging you an additional 0.5-0.6% "administrative fee", which is code for "we want to extract even more profits from this person". Also I am guessing that there are other hidden fees. I picked one of the funds (Calvert Equity) and looked it up. According to what I see on Google Finance, there is a "load" of 4.75%. That means that when you invest, you LOSE 4.75% right off the top as sales commission.

Fourth, consider that you are not only betting that these active fund managers are going to beat the market but that you are also betting that your financial person knows how to pick the right funds and how to allocate among these funds. That sounds like a losing bet to me.

If I had to guess, this financial person is a salesperson who gets commission for selling these specific funds. He/she probably doesn't have your best interest in mind.

If it were me, I'd walk away.
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by sport »

humblecoder wrote: Sun Oct 17, 2021 8:46 am If it were me, I'd walk away.
Run, don't walk!
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markjk
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by markjk »

Historically speaking, passive index investing beats active management over time something like over a 75% clip. The thought of active management is attractive and natural in a lot of ways. Why wouldn't a human spending time strategizing and applying years of experience be able to beat a passive index? The answer is they can, just not consistently. Active managers can have spurts of years where they do beat the averages. Then come spurts of years where they fail to come close. That's why this discussion always requires that "over time" caveat. When you factor in the fees of active management along with the "over time" caveat, it's a long term losing bet if you play the averages. This of course assumes the past will look somewhat like the future. Who knows if it will but it's the only information we have to go on.

My advice based on years of looking at this stuff? Keep it simple. Pick up a couple of passively managed low cost index funds and call it a day. Putting more time and effort only contributes to diminishing returns (on average). Once the base of your portfolio is in a place you are happy with, then take a chance on individual stocks or maybe some actively managed funds. Use that as a way to scratch the "I can beat the market" itch. Maybe you can? But if you don't (chances are you won't), at least it's only with a portion of your holdings and not the entire portfolio.
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retiredjg
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by retiredjg »

alaska1986 wrote: Sun Oct 17, 2021 8:20 am Would appreciate any thoughts on this proposal and general thoughts on paying more fees for more growth potential. I'm aware that many index funds outperform many actively managed funds but I'm sure there are instances where the growth of actively managed funds outweighs the fees and I'm curious to here more on that.
Thanks!
Not sure I'm following this proposal exactly, but it seems you are considering moving money from perfectly good low cost funds into a conglomeration of very high cost funds in an account which also have a high annual record-keeping fee. Your fees will increase at least 1% and maybe near 2% a year. :shock:

I'm sorry to sound harsh or rude, but that proposal is just nuts. :( This idea came from a salesperson who is interested in making money off of your money. There is nothing good for you in this proposal at all. Do not do this.

On a side note i had read on this forum that once you get above $100-200k mark in your 401k you should start diversifying your portfolio a bit more and incorporating things like growth funds etc although that in itself doesnt mean you have to leave a passively managed account.
Maybe someone did say something like this at one time, but it is certainly not anything supported by the basic Boglehead principles.

From the information given, it appears you are doing a good job on your own. You might want to roll the old 401k into the new 401k and Roth IRA to simplify.
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Kenkat
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by Kenkat »

You are going to get absolutely slaughtered on fees with Voya. With the record keeping fees on top of the high expense active funds, you are extremely unlikely to be able to beat almost any reasonable portfolio made up of low cost funds / index funds. Easily 1.5 to 2%+ of your money is going to get siphoned off every year in fees.
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ruralavalon
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by ruralavalon »

alaska1986 wrote: Sun Oct 17, 2021 8:20 am . . . I would like to get some input on a proposal i was given by an allstate financial person to move ex employer 401k funds to ira, . . . .
A rollover issue depends almost entirely on expenses and funds offered and expenses charged. There are three basic choices.

1) If the funds offered in the old 401k are good with low expense ratios, and there is no account maintenance fee charged for keeping the account there or only a small fee, then it may be best to leave the old 401k where it is.

2) If the new 401k offers similar or better funds with similar or lower expense ratios, and will accept a rollover from the old 401k, then it may be best to roll the old 401k over into the new 401k.

3) If neither 401k offers good funds with low expense ratios then it may be best to roll the old 401k over to an IRA at a low cost fund provider like Vanguard, Fidelity or Schwab.

Wiki article, 401k, ”Rollover to IRA".

Additional considerations include:

1) the convenience of having one fewer account to keep track and manage, if you move the old 401k into the new plan or an IRA;

2) depending on your state, a 401k plan may have greater protection from creditors than does an IRA;

3) a rollover to an IRA may impede ability to do a Backdoor Roth IRA, which may be an important consideration for higher income individuals, and

3) a 401k allows earlier distributions penalty free starting at age 55 (versus age 59.5 for an IRA) if no longer employed by the employer offering the plan.
Wiki article, 401k, "Move to new 401k".



alaska1986 wrote: Sun Oct 17, 2021 8:20 am . . . it has me thinking about actively managed funds and their expenses vs additional growth potential. On a side note i had read on this forum that once you get above $100-200k mark in your 401k you should start diversifying your portfolio a bit more and incorporating things like growth funds etc although that in itself doesnt mean you have to leave a passively managed account.
In general prefer index funds over even good actively managed funds.

In general prefer broadly diversified funds rather than funds that concentrated a section of the market like "growth" funds.


alaska1986 wrote: Sun Oct 17, 2021 8:20 amSo i left my employer april 2021 and left my 401k funds (including yearly aftertax roth ira rollovers) with fidelity mostly because of the vanguard institutional shares. Below are the positions. I'd like your input on

. . . . .

Fidelity(funds from rolling out aftertax money from plan to roth ira each year):
Roth ira $115k
Fsggx - global ex us fund $34,800 .06%er
Fskax - total market index $55,300 .02%er

Ex employer 401k - $240k ($91k roth, $149k pretax)
Fxnax - fidelity us bond index $46,400 .32%er
Vfwsx- ftse all word ex us index institutional $21,600 .08%er
Vieix- extended market index institutional $34,200 .05%er
Vinix- institutional index $137,500 .035%er
In your "Ex employer 401k" those are good, very diversified index funds with very low expense ratios. I see no reason to want to be out of those investments, unless there are additional high fees charged plan participants, like record keeping, account maintenance, or plan administration fees.

Are there any other fees you are charged other than the expense ratios? If so what are the additional fees?


alaska1986 wrote: Sun Oct 17, 2021 8:20 amMy CURRENT employer 401k holdings
Principal $13k
Fidelity us bond index fxnax .32%er $1300
Fidelity 500 index fxaix .015%er $7k
Fidelity extended mkt fsmax .035%er $1700
Fidelity total intl ftihx .06%er $3200
Those are good, very diversified, index funds with very low expense ratios.

Are there any other fees you are charged other than the expense ratios? If so what are the additional fees?

Will your "CURRENT employer 401k"accept a rollover of your "ex-employer 401k account"?

If no additional fees are charged, and a rollover will be accepted, then I suggest rollover of your "Ex employer 401k" into your "CURRENT employer 401k".

alaska1986 wrote: Sun Oct 17, 2021 8:20 amCURRENT Wife holdings
Roth 401k etrade $27k vtsax total stock market admiral share .04%er
Roth ira vanguard $8k vtiax total intl stock index admiral .11% er
Traditional ira vanguard $13k
Vbtlx $3k bond market index admiral
Vtsax $10k


PROPOSED MOVE
my $208k roth rollover voya .5% annual recording keeping
Growth portfolio
Aegfx-american funds europacific growth .84%er
Bhsrx- blackrock health science 1.44%er
Csiex- calvert equity .94%er
Sgtrx- columbia seligman global tech 1.56% er
Kaufx- federated hermes kaufmann 1.97%er
Fkdnx-franklin dynatech .85%er
Lgmax-loomis sayles global allocation 1.15%er
Itrax- t rowe price capital appreciation 1.24%er

my $150k traditional rollover
Voya select advantage ira .5%annual recordkeeping fee
Same 8 funds as above in growth portfolio

Wife $13k traditional & $35k roth ira rollover
Voya select advantage ira .6% recordkeeping fee
Same 8 funds as above in growth portfolio

Would appreciate any thoughts on this proposal and general thoughts on paying more fees for more growth potential. I'm aware that many index funds outperform many actively managed funds but I'm sure there are instances where the growth of actively managed funds outweighs the fees and I'm curious to here more on that.
Thanks!
That is a horrible idea in my opinion.

Low expense ratios are critical to long-term investing performance. Seemingly small annual fees can have a large cumulative impact over time. Here is a "Mutual fund fees calculator" you could use to estimate the impact of investing expenses.

Also, low expense ratios are the best predictor of future performance. Morningstar, 8/9/10 . “If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds.” “Investors should make expense ratios a primary test in fund selection. They are still the most dependable predictor of performance.”

"The expense ratio is the most proven predictor of future fund returns." "There are many other things to consider, but investors should make expense ratios their first or second screen." Morningstar, 5/5/18.

In general index funds have usually done better than actively managed funds. Please see:
Index Fund Advisors (10/7/2020), “SPIVA: 2020 Mid-Year Active vs. Passive Scorecard“, link.
Last edited by ruralavalon on Sun Oct 17, 2021 9:43 am, edited 2 times in total.
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Brianmcg321
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by Brianmcg321 »

Voya is garbage. Don’t do it.
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by Watty »

Kenkat wrote: Sun Oct 17, 2021 9:18 am Easily 1.5 to 2%+ of your money is going to get siphoned off every year in fees.
For some perspective there are all sorts of qualifications and assumptions but accidemic studies have shown that in the past a 65 could retire and start out with about a 4% "safe withdrawal rate". The problem is that those fees come out of your 4% so if you are paying them 2% that is over half of the money that you could be spending.

The fees are sort of like cockroaches. You may see that 1.5 to 2% in fees but there are very likely all sorts of other hidden fees too.
alaska1986 wrote: Sun Oct 17, 2021 8:20 am Would appreciate any thoughts on this proposal and general thoughts on paying more fees for more growth potential. I'm aware that many index funds outperform many actively managed funds but I'm sure there are instances where the growth of actively managed funds outweighs the fees and I'm curious to here more on that.
Pretty much by definition index funds are average so half of actively managed funds will outperform an index fund before costs in a given year. After costs that might be reduced so only something like a third of actively managed funds will beat a similar index fund. The cost of the extra fees compounds so that over 5, 10, 20 or more years fewer and fewer actively managed funds will beat index funds.

What will happen though is that over the years the poorly performing funds will be shut down or merged with other funds so that you will not longer see their history. This is how a company can you you a list of all their mutual funds and it looks like most of them beat their index. This is called survivorship bias.

Some mutual fund companies will do this intentionally and and open up 20 tiny mutual funds called incubator funds that you will not see on their normal list of funds. After a few just by random chance a few will do well and will then be offered to the public with several years performance history, the rest will be shut down.


I would caution you that the person you are dealing with may be very well trained in how to deal with your objections about the high costs. If you give them a chance then they may may very well be a better sales person than you are at resisting sales tactics.
Last edited by Watty on Sun Oct 17, 2021 9:51 am, edited 1 time in total.
Silverado
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by Silverado »

Thankfully you asked here, and hopefully you listen. This is such a blatant cash grab, that it is painful to contemplate what the impact over 30 years would be to your money.

It is horrible in every single way for you. Never talk to that allstate person again. Not even if they are family…
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by sailaway »

Congratulations, you are a natural born boglehead with reasonable investments. Please don't mess this up by paying others to complicate things for you! Or, as they say around here, stay the course.
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by ResearchMed »

humblecoder wrote: Sun Oct 17, 2021 8:46 am First, I didn't do the exact math, but your current asset allocation is around 10-15% bond. However, the proposed plan seems to be 0% bond. Is that what you intend? What is your risk tolerance?

Second, the fund proposed appear to be concentrated in different sectors (health science, tech, "europacific" whatever that means). Is it your intention to concentrate all of your holdings into these few sectors?

Third, not only are the fund expenses super high, but they are charging you an additional 0.5-0.6% "administrative fee", which is code for "we want to extract even more profits from this person". Also I am guessing that there are other hidden fees. I picked one of the funds (Calvert Equity) and looked it up. According to what I see on Google Finance, there is a "load" of 4.75%. That means that when you invest, you LOSE 4.75% right off the top as sales commission.

Fourth, consider that you are not only betting that these active fund managers are going to beat the market but that you are also betting that your financial person knows how to pick the right funds and how to allocate among these funds. That sounds like a losing bet to me.

If I had to guess, this financial person is a salesperson who gets commission for selling these specific funds. He/she probably doesn't have your best interest in mind.

If it were me, I'd walk away.
[emphasis added]

As others have already, and quite rightly, mentioned, this "new suggestion" is good for the advisor and NOT GOOD FOR YOU. Full Stop.

However, in the interest of fairness (whether said advisor/firm deserves it or not, ahem), that "load" may or may not actually apply. In some cases, one of the [very few] advantages of working with an advisor is that these "loads" (which you can consider to be sales commissions paid off the top, leaving you with that much less actually to invest) is that loads might be waived. That "advantage" means that you aren't being hit with something you never wanted in the first place. Not a real bargain!

But there are some "load" funds that have the loads waived simply by virtue of being purchased on your own, with money held at, say, Schwab or TIAA... no need for any "advisor" to help... or collect fees.
So *IF* you wanted some funds that show as having loads, you may be able to get them someplace else without the load. And in this case, saving approximately 5% straightaway is worth looking into this. Don't forget: That "missing 5%" is not compounding for what may be decades, and that could have added quite nicely to the total.

But if there are not loads, it does NOT excuse the use of high fee funds PLUS the overall fee on top of that!

Watty wrote: Sun Oct 17, 2021 9:39 am I would caution you that the person you are dealing with may be very well trained in how to deal with your objections about the high costs. If you give them a chance then they may may very well be a better sales person than you are at resisting sales tactics.
The above comment is important. These advisors are well trained and experienced in dealing with prospective or current clients who question the value of working with them and of paying the assorted fees. It could sound convincing. That's "what they do", and their own income depends upon it.
They are likely to show you PAST returns that show "how much better their choices did" than, say, index funds. But they are able to show this to you after they already know which funds did well over those past years! Did they predict these exact funds X years ago?? Unlikely.
They do NOT have *your* best interests in mind.

RM
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JoMoney
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by JoMoney »

alaska1986 wrote: Sun Oct 17, 2021 8:20 am.. On a side note i had read on this forum that once you get above $100-200k mark in your 401k you should start diversifying your portfolio a bit more and incorporating things like growth funds etc...
That does not sound like "Investing Advice Inspired by Jack Bogle."
But it does sound like the type of excuse often proffered here for diverging from a broad-market stock index fund, that somehow holding more funds or different weightings is somehow better "diversified." The word "diversified" itself offered as if it's a worthy of objective on it's own, without explaining what its supposed to offer... Is it supposed to bring better returns? lower risk? better "risk adjusted returns" based on some measure... things that can often be shown as false or at least shown that the offered "diversified portfolio" offers no reliable predictability in offering.
Diversification is important, but it's more often used (over-used) as an excuse to sell someone on something completely unnecessary.
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by exodusNH »

alaska1986 wrote: Sun Oct 17, 2021 8:20 am First off i want to start by saying thank you all for providing some of the best free investment advice on the net. I would like to get some input on a proposal i was given by an allstate financial person to move ex employer 401k funds to ira, it has me thinking about actively managed funds and their expenses vs additional growth potential. On a side note i had read on this forum that once you get above $100-200k mark in your 401k you should start diversifying your portfolio a bit more and incorporating things like growth funds etc although that in itself doesnt mean you have to leave a passively managed account.

So i left my employer april 2021 and left my 401k funds (including yearly aftertax roth ira rollovers) with fidelity mostly because of the vanguard institutional shares. Below are the positions. I'd like your input on

Me:Age 35, salary 110k-120k range
Wife: age 30, 40k salary (will be attending school soon)
Side note: looking to start family soon

Fidelity(funds from rolling out aftertax money from plan to roth ira each year):
Roth ira $115k
Fsggx - global ex us fund $34,800 .06%er
Fskax - total market index $55,300 .02%er

Ex employer 401k - $240k ($91k roth, $149k pretax)
Fxnax - fidelity us bond index $46,400 .32%er
Vfwsx- ftse all word ex us index institutional $21,600 .08%er
Vieix- extended market index institutional $34,200 .05%er
Vinix- institutional index $137,500 .035%er

My CURRENT employer 401k holdings
Principal $13k
Fidelity us bond index fxnax .32%er $1300
Fidelity 500 index fxaix .015%er $7k
Fidelity extended mkt fsmax .035%er $1700
Fidelity total intl ftihx .06%er $3200

CURRENT Wife holdings
Roth 401k etrade $27k vtsax total stock market admiral share .04%er
Roth ira vanguard $8k vtiax total intl stock index admiral .11% er
Traditional ira vanguard $13k
Vbtlx $3k bond market index admiral
Vtsax $10k


PROPOSED MOVE
my $208k roth rollover voya .5% annual recording keeping
Growth portfolio
Aegfx-american funds europacific growth .84%er
Bhsrx- blackrock health science 1.44%er
Csiex- calvert equity .94%er
Sgtrx- columbia seligman global tech 1.56% er
Kaufx- federated hermes kaufmann 1.97%er
Fkdnx-franklin dynatech .85%er
Lgmax-loomis sayles global allocation 1.15%er
Itrax- t rowe price capital appreciation 1.24%er

my $150k traditional rollover
Voya select advantage ira .5%annual recordkeeping fee
Same 8 funds as above in growth portfolio

Wife $13k traditional & $35k roth ira rollover
Voya select advantage ira .6% recordkeeping fee
Same 8 funds as above in growth portfolio

Would appreciate any thoughts on this proposal and general thoughts on paying more fees for more growth potential. I'm aware that many index funds outperform many actively managed funds but I'm sure there are instances where the growth of actively managed funds outweighs the fees and I'm curious to here more on that.
Thanks!
Do not do this.

What you have is great! Leave it alone.

$100-200k is not a threshold to go fiddling with your investments.

This is a sales person selling you on making a move that will hurt you financially. Every 0.5% in fees you pay results in a loss of about $1M over an investing career because it undermines compounding.

This person is very well-trained and knows how to deflect / answer any question you throw at him. Stop talking to them.
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by ruralavalon »

Will your "CURRENT employer 401k"accept a rollover of your "ex-employer 401k account"?

If no additional fees are charged, and a rollover will be accepted, then I suggest rollover of your "Ex employer 401k" into your "CURRENT employer 401k".

I think that would be by far the best solution. It simplifies your portfolio with one less account to keep track of and msnage, preserves the asset protection of a ERISA plan, preserves the ability to have an earlier retirement with plan withdrawals penalty-free at age 55, and keeps you in very diversified index funds with very low expense ratios.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by BL »

You have received good advice here. Thank goodness you bothered to get an opinion here where folks have your best interests in mind rather than the high cost proposal that someone suggested and would probably get a good cut one way or another. Why jump from low cost to ridiculously high costs?
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by Nate79 »

Allstate financial person? I guess you mean Allstate insurance salesperson.

Ouch, horrible plan.
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by anon_investor »

Nate79 wrote: Sun Oct 17, 2021 12:37 pm Ouch, horrible plan.
+1.
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by Big Dog »

ruralavalon wrote: Sun Oct 17, 2021 10:58 am Will your "CURRENT employer 401k"accept a rollover of your "ex-employer 401k account"?

If no additional fees are charged, and a rollover will be accepted, then I suggest rollover of your "Ex employer 401k" into your "CURRENT employer 401k".

I think that would be by far the best solution. It simplifies your portfolio with one less account to keep track of and msnage, preserves the asset protection of a ERISA plan, preserves the ability to have an earlier retirement with plan withdrawals penalty-free at age 55, and keeps you in very diversified index funds with very low expense ratios.
+1
retire2022
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by retire2022 »

Op

I agree what others said about Voya proposal.

I am strong believer in “Rollover” to self manage account to Fidelity since you are use to their funds and software, or any other custodian of your choosing.

You may find DIY and its future balance maybe significantly larger by being self managed, than with sticking with employer plan.

You have more selections and lower fee costs.

My IRA contributions as if you go by total 35 years of contributions 134k with present balance of 761k.
Last edited by retire2022 on Sun Oct 17, 2021 1:06 pm, edited 1 time in total.
shess
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by shess »

alaska1986 wrote: Sun Oct 17, 2021 8:20 am Would appreciate any thoughts on this proposal and general thoughts on paying more fees for more growth potential.
Bogle created Vanguard and an S&P index fund back in the 70's under the theory that active management was a wash, since every trade has two sides, and indexing could beat it on net by having lower expenses. For almost 50 years indexing has been fighting the headwind of "It stands to reason that active management has better growth potential", but all along indexing has been grabbing bits of assets year by year. One would think that if active management really delivered on that growth potential, 50 years would maybe be enough time to demonstrate it? And if indexing really didn't deliver, 50 years would be enough time to expose it for a fraud? And yet, here we are.

I spent the early 90's trying to pick the best active manager to get all that growth. I spent the later 90's and early 00's trying to use things like Foolish Four to nab it myself. Then in the late 00's I switched to a core 3-fund portfolio along the lines of the wiki's definition. Looking back at my returns over time, as best I can tell the 3-fund portfolio has delivered all of the returns my previous work had delivered, with a fraction of the effort. I now suspect that in all of my prior efforts, I was simply engaging in factor investing using inefficient tools, and I consider myself lucky that I didn't take any nasty portfolio damage from it.

Anyhow ... given what you presented, I'd probably leave the ex-employer funds in place, but I might consolidate everything into fewer positions. My spouse and I have 2 Roth IRAs and one traditional IRA plus my 401k (which is much larger than the IRA accounts), plus a large taxable account. So I put each IRA into a single position, and our taxable accounts are in a couple tax-efficient positions (broad-market domestic and international funds), and then the big 401k ends up being the rebalancing point for the portfolio. My goal is to keep everything easy to manage, since I mostly never have to touch anything other than the 401k.

I can't even begin to communicate how hard I'd avoid this Voya move. All they are doing is telling you that this problem is too complicated for you to manage, and then they are charging you to make it too complicated for you to understand. Worst thing about it is that their rep probably actually believes they are trying to help you.
5280Tim
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by 5280Tim »

alaska1986 wrote: Sun Oct 17, 2021 8:20 am First off i want to start by saying thank you all for providing some of the best free investment advice on the net. I would like to get some input on a proposal i was given by an allstate financial person to move ex employer 401k funds to ira, it has me thinking about actively managed funds and their expenses vs additional growth potential. On a side note i had read on this forum that once you get above $100-200k mark in your 401k you should start diversifying your portfolio a bit more and incorporating things like growth funds etc although that in itself doesnt mean you have to leave a passively managed account.

So i left my employer april 2021 and left my 401k funds (including yearly aftertax roth ira rollovers) with fidelity mostly because of the vanguard institutional shares. Below are the positions. I'd like your input on

Me:Age 35, salary 110k-120k range
Wife: age 30, 40k salary (will be attending school soon)
Side note: looking to start family soon

Fidelity(funds from rolling out aftertax money from plan to roth ira each year):
Roth ira $115k
Fsggx - global ex us fund $34,800 .06%er
Fskax - total market index $55,300 .02%er

Ex employer 401k - $240k ($91k roth, $149k pretax)
Fxnax - fidelity us bond index $46,400 .32%er
Vfwsx- ftse all word ex us index institutional $21,600 .08%er
Vieix- extended market index institutional $34,200 .05%er
Vinix- institutional index $137,500 .035%er

My CURRENT employer 401k holdings
Principal $13k
Fidelity us bond index fxnax .32%er $1300
Fidelity 500 index fxaix .015%er $7k
Fidelity extended mkt fsmax .035%er $1700
Fidelity total intl ftihx .06%er $3200

CURRENT Wife holdings
Roth 401k etrade $27k vtsax total stock market admiral share .04%er
Roth ira vanguard $8k vtiax total intl stock index admiral .11% er
Traditional ira vanguard $13k
Vbtlx $3k bond market index admiral
Vtsax $10k


PROPOSED MOVE
my $208k roth rollover voya .5% annual recording keeping
Growth portfolio
Aegfx-american funds europacific growth .84%er
Bhsrx- blackrock health science 1.44%er
Csiex- calvert equity .94%er
Sgtrx- columbia seligman global tech 1.56% er
Kaufx- federated hermes kaufmann 1.97%er
Fkdnx-franklin dynatech .85%er
Lgmax-loomis sayles global allocation 1.15%er
Itrax- t rowe price capital appreciation 1.24%er

my $150k traditional rollover
Voya select advantage ira .5%annual recordkeeping fee
Same 8 funds as above in growth portfolio

Wife $13k traditional & $35k roth ira rollover
Voya select advantage ira .6% recordkeeping fee
Same 8 funds as above in growth portfolio

Would appreciate any thoughts on this proposal and general thoughts on paying more fees for more growth potential. I'm aware that many index funds outperform many actively managed funds but I'm sure there are instances where the growth of actively managed funds outweighs the fees and I'm curious to here more on that.
Thanks!
I didn’t read every other response yet, but I’m sure the thoughts are similar to mine. This is an absolutely terrible idea. These fees and expense ratios will end up costing you at least 40% of your portfolio by the time you retire.
HeelaMonster
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by HeelaMonster »

The advice you have received above is so clear and consistent, all I can add is... "DITTO!"
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retiredjg
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by retiredjg »

It is nice to have responses that are all the same once in awhile. :happy
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alaska1986
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by alaska1986 »

Risk tolerance would be down to 5% bonds so good point
No i do not have a desire to concentrate only on these sectors

Thank you for highlighting the fees they appeared very high to me as well and i wasnt sure the growth would outweigh the benefit. It all seems clearer to me now.

Thank you for the insight and perspective
humblecoder wrote: Sun Oct 17, 2021 8:46 am First, I didn't do the exact math, but your current asset allocation is around 10-15% bond. However, the proposed plan seems to be 0% bond. Is that what you intend? What is your risk tolerance?

Second, the fund proposed appear to be concentrated in different sectors (health science, tech, "europacific" whatever that means). Is it your intention to concentrate all of your holdings into these few sectors?

Third, not only are the fund expenses super high, but they are charging you an additional 0.5-0.6% "administrative fee", which is code for "we want to extract even more profits from this person". Also I am guessing that there are other hidden fees. I picked one of the funds (Calvert Equity) and looked it up. According to what I see on Google Finance, there is a "load" of 4.75%. That means that when you invest, you LOSE 4.75% right off the top as sales commission.

Fourth, consider that you are not only betting that these active fund managers are going to beat the market but that you are also betting that your financial person knows how to pick the right funds and how to allocate among these funds. That sounds like a losing bet to me.

If I had to guess, this financial person is a salesperson who gets commission for selling these specific funds. He/she probably doesn't have your best interest in mind.

If it were me, I'd walk away.
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alaska1986
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by alaska1986 »

Thank you very well put. Thanks for the summary on active managed funds that was very helpful.
markjk wrote: Sun Oct 17, 2021 8:59 am Historically speaking, passive index investing beats active management over time something like over a 75% clip. The thought of active management is attractive and natural in a lot of ways. Why wouldn't a human spending time strategizing and applying years of experience be able to beat a passive index? The answer is they can, just not consistently. Active managers can have spurts of years where they do beat the averages. Then come spurts of years where they fail to come close. That's why this discussion always requires that "over time" caveat. When you factor in the fees of active management along with the "over time" caveat, it's a long term losing bet if you play the averages. This of course assumes the past will look somewhat like the future. Who knows if it will but it's the only information we have to go on.

My advice based on years of looking at this stuff? Keep it simple. Pick up a couple of passively managed low cost index funds and call it a day. Putting more time and effort only contributes to diminishing returns (on average). Once the base of your portfolio is in a place you are happy with, then take a chance on individual stocks or maybe some actively managed funds. Use that as a way to scratch the "I can beat the market" itch. Maybe you can? But if you don't (chances are you won't), at least it's only with a portion of your holdings and not the entire portfolio.
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alaska1986
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by alaska1986 »

Thank you and yes the fees did raise a red flag which is why i wanted to get a second opinion here. I have been perfectly happy with the index funds as they serve my goals but i always lacked the knowledge on actively managed funds and how they compare up with the index funds. I think these replies make it clear once and for all so thank you.
retiredjg wrote: Sun Oct 17, 2021 9:16 am
alaska1986 wrote: Sun Oct 17, 2021 8:20 am Would appreciate any thoughts on this proposal and general thoughts on paying more fees for more growth potential. I'm aware that many index funds outperform many actively managed funds but I'm sure there are instances where the growth of actively managed funds outweighs the fees and I'm curious to here more on that.
Thanks!
Not sure I'm following this proposal exactly, but it seems you are considering moving money from perfectly good low cost funds into a conglomeration of very high cost funds in an account which also have a high annual record-keeping fee. Your fees will increase at least 1% and maybe near 2% a year. :shock:

I'm sorry to sound harsh or rude, but that proposal is just nuts. :( This idea came from a salesperson who is interested in making money off of your money. There is nothing good for you in this proposal at all. Do not do this.

On a side note i had read on this forum that once you get above $100-200k mark in your 401k you should start diversifying your portfolio a bit more and incorporating things like growth funds etc although that in itself doesnt mean you have to leave a passively managed account.
Maybe someone did say something like this at one time, but it is certainly not anything supported by the basic Boglehead principles.

From the information given, it appears you are doing a good job on your own. You might want to roll the old 401k into the new 401k and Roth IRA to simplify.
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alaska1986
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by alaska1986 »

Thank you that makes it an easy decision for me. Nothing better than easy decisions

Kenkat wrote: Sun Oct 17, 2021 9:18 am You are going to get absolutely slaughtered on fees with Voya. With the record keeping fees on top of the high expense active funds, you are extremely unlikely to be able to beat almost any reasonable portfolio made up of low cost funds / index funds. Easily 1.5 to 2%+ of your money is going to get siphoned off every year in fees.
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alaska1986
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by alaska1986 »

Thank you this was very informative.

To answer at least one of your question no there are no additional fees at my ex employers 401k outside of expense ratio. Those funds are better and cheaper than the options at my current employer 401k so i plan to keep them there. I don't mind the minor inconvenience for the institutional shares

Good points on the protection from creditor and backdoor roth i will keep those in mind
ruralavalon wrote: Sun Oct 17, 2021 9:20 am
alaska1986 wrote: Sun Oct 17, 2021 8:20 am . . . I would like to get some input on a proposal i was given by an allstate financial person to move ex employer 401k funds to ira, . . . .
A rollover issue depends almost entirely on expenses and funds offered and expenses charged. There are three basic choices.

1) If the funds offered in the old 401k are good with low expense ratios, and there is no account maintenance fee charged for keeping the account there or only a small fee, then it may be best to leave the old 401k where it is.

2) If the new 401k offers similar or better funds with similar or lower expense ratios, and will accept a rollover from the old 401k, then it may be best to roll the old 401k over into the new 401k.

3) If neither 401k offers good funds with low expense ratios then it may be best to roll the old 401k over to an IRA at a low cost fund provider like Vanguard, Fidelity or Schwab.

Wiki article, 401k, ”Rollover to IRA".

Additional considerations include:

1) the convenience of having one fewer account to keep track and manage, if you move the old 401k into the new plan or an IRA;

2) depending on your state, a 401k plan may have greater protection from creditors than does an IRA;

3) a rollover to an IRA may impede ability to do a Backdoor Roth IRA, which may be an important consideration for higher income individuals, and

3) a 401k allows earlier distributions penalty free starting at age 55 (versus age 59.5 for an IRA) if no longer employed by the employer offering the plan.
Wiki article, 401k, "Move to new 401k".



alaska1986 wrote: Sun Oct 17, 2021 8:20 am . . . it has me thinking about actively managed funds and their expenses vs additional growth potential. On a side note i had read on this forum that once you get above $100-200k mark in your 401k you should start diversifying your portfolio a bit more and incorporating things like growth funds etc although that in itself doesnt mean you have to leave a passively managed account.
In general prefer index funds over even good actively managed funds.

In general prefer broadly diversified funds rather than funds that concentrated a section of the market like "growth" funds.


alaska1986 wrote: Sun Oct 17, 2021 8:20 amSo i left my employer april 2021 and left my 401k funds (including yearly aftertax roth ira rollovers) with fidelity mostly because of the vanguard institutional shares. Below are the positions. I'd like your input on

. . . . .

Fidelity(funds from rolling out aftertax money from plan to roth ira each year):
Roth ira $115k
Fsggx - global ex us fund $34,800 .06%er
Fskax - total market index $55,300 .02%er

Ex employer 401k - $240k ($91k roth, $149k pretax)
Fxnax - fidelity us bond index $46,400 .32%er
Vfwsx- ftse all word ex us index institutional $21,600 .08%er
Vieix- extended market index institutional $34,200 .05%er
Vinix- institutional index $137,500 .035%er
In your "Ex employer 401k" those are good, very diversified index funds with very low expense ratios. I see no reason to want to be out of those investments, unless there are additional high fees charged plan participants, like record keeping, account maintenance, or plan administration fees.

Are there any other fees you are charged other than the expense ratios? If so what are the additional fees?


alaska1986 wrote: Sun Oct 17, 2021 8:20 amMy CURRENT employer 401k holdings
Principal $13k
Fidelity us bond index fxnax .32%er $1300
Fidelity 500 index fxaix .015%er $7k
Fidelity extended mkt fsmax .035%er $1700
Fidelity total intl ftihx .06%er $3200
Those are good, very diversified, index funds with very low expense ratios.

Are there any other fees you are charged other than the expense ratios? If so what are the additional fees?

Will your "CURRENT employer 401k"accept a rollover of your "ex-employer 401k account"?

If no additional fees are charged, and a rollover will be accepted, then I suggest rollover of your "Ex employer 401k" into your "CURRENT employer 401k".

alaska1986 wrote: Sun Oct 17, 2021 8:20 amCURRENT Wife holdings
Roth 401k etrade $27k vtsax total stock market admiral share .04%er
Roth ira vanguard $8k vtiax total intl stock index admiral .11% er
Traditional ira vanguard $13k
Vbtlx $3k bond market index admiral
Vtsax $10k


PROPOSED MOVE
my $208k roth rollover voya .5% annual recording keeping
Growth portfolio
Aegfx-american funds europacific growth .84%er
Bhsrx- blackrock health science 1.44%er
Csiex- calvert equity .94%er
Sgtrx- columbia seligman global tech 1.56% er
Kaufx- federated hermes kaufmann 1.97%er
Fkdnx-franklin dynatech .85%er
Lgmax-loomis sayles global allocation 1.15%er
Itrax- t rowe price capital appreciation 1.24%er

my $150k traditional rollover
Voya select advantage ira .5%annual recordkeeping fee
Same 8 funds as above in growth portfolio

Wife $13k traditional & $35k roth ira rollover
Voya select advantage ira .6% recordkeeping fee
Same 8 funds as above in growth portfolio

Would appreciate any thoughts on this proposal and general thoughts on paying more fees for more growth potential. I'm aware that many index funds outperform many actively managed funds but I'm sure there are instances where the growth of actively managed funds outweighs the fees and I'm curious to here more on that.
Thanks!
That is a horrible idea in my opinion.

Low expense ratios are critical to long-term investing performance. Seemingly small annual fees can have a large cumulative impact over time. Here is a "Mutual fund fees calculator" you could use to estimate the impact of investing expenses.

Also, low expense ratios are the best predictor of future performance. Morningstar, 8/9/10 . “If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds.” “Investors should make expense ratios a primary test in fund selection. They are still the most dependable predictor of performance.”

"The expense ratio is the most proven predictor of future fund returns." "There are many other things to consider, but investors should make expense ratios their first or second screen." Morningstar, 5/5/18.

In general index funds have usually done better than actively managed funds. Please see:
Index Fund Advisors (10/7/2020), “SPIVA: 2020 Mid-Year Active vs. Passive Scorecard“, link.
niagara_guy
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by niagara_guy »

Why don't you use the search box (upper left corner of Bogleheads page) to search on Voya? Or, do a Google search on 'Voya sucks.' Here is a post of my experience with Voya:

viewtopic.php?t=303534
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alaska1986
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by alaska1986 »

Thank you

Yes 1.5-2% for someone retiring and pulling 4% withdrawal rate is obsurd point well taken

Thank you for the intel on the performance now i better understand the tactics.

Trust me i have no issue saying no especially when its a hard no. In this particular instance the person is not pushy and comes of like a very nice person. But there's no room for friends when it comes to the future of my family and retirement :)

Thank you
Watty wrote: Sun Oct 17, 2021 9:39 am
Kenkat wrote: Sun Oct 17, 2021 9:18 am Easily 1.5 to 2%+ of your money is going to get siphoned off every year in fees.
For some perspective there are all sorts of qualifications and assumptions but accidemic studies have shown that in the past a 65 could retire and start out with about a 4% "safe withdrawal rate". The problem is that those fees come out of your 4% so if you are paying them 2% that is over half of the money that you could be spending.

The fees are sort of like cockroaches. You may see that 1.5 to 2% in fees but there are very likely all sorts of other hidden fees too.
alaska1986 wrote: Sun Oct 17, 2021 8:20 am Would appreciate any thoughts on this proposal and general thoughts on paying more fees for more growth potential. I'm aware that many index funds outperform many actively managed funds but I'm sure there are instances where the growth of actively managed funds outweighs the fees and I'm curious to here more on that.
Pretty much by definition index funds are average so half of actively managed funds will outperform an index fund before costs in a given year. After costs that might be reduced so only something like a third of actively managed funds will beat a similar index fund. The cost of the extra fees compounds so that over 5, 10, 20 or more years fewer and fewer actively managed funds will beat index funds.

What will happen though is that over the years the poorly performing funds will be shut down or merged with other funds so that you will not longer see their history. This is how a company can you you a list of all their mutual funds and it looks like most of them beat their index. This is called survivorship bias.

Some mutual fund companies will do this intentionally and and open up 20 tiny mutual funds called incubator funds that you will not see on their normal list of funds. After a few just by random chance a few will do well and will then be offered to the public with several years performance history, the rest will be shut down.


I would caution you that the person you are dealing with may be very well trained in how to deal with your objections about the high costs. If you give them a chance then they may may very well be a better sales person than you are at resisting sales tactics.
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alaska1986
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by alaska1986 »

Copy 10-4

Some times we need to say things outloud to see how foolish they really are. I get the consenus that this is one of those times.

Thanks for taking it easy on me. Im staying put as im doing just fine
Silverado wrote: Sun Oct 17, 2021 9:42 am Thankfully you asked here, and hopefully you listen. This is such a blatant cash grab, that it is painful to contemplate what the impact over 30 years would be to your money.

It is horrible in every single way for you. Never talk to that allstate person again. Not even if they are family…
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alaska1986
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by alaska1986 »

No worries im staying put
sailaway wrote: Sun Oct 17, 2021 10:03 am Congratulations, you are a natural born boglehead with reasonable investments. Please don't mess this up by paying others to complicate things for you! Or, as they say around here, stay the course.
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alaska1986
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by alaska1986 »

Good points all around.

Thanks for the info on the loads.

As far as the salesperson, he isn't more of shark than me so this will be a hard no with no followup ever needed. He already knows that i am somewhat educated and doing well with my management so I'm surprised he came at me with this nonsense.

And yes you are completely spot on with the performance they show and i highly doubt he'd be skilled enough to match this moving forward


ResearchMed wrote: Sun Oct 17, 2021 10:12 am
humblecoder wrote: Sun Oct 17, 2021 8:46 am First, I didn't do the exact math, but your current asset allocation is around 10-15% bond. However, the proposed plan seems to be 0% bond. Is that what you intend? What is your risk tolerance?

Second, the fund proposed appear to be concentrated in different sectors (health science, tech, "europacific" whatever that means). Is it your intention to concentrate all of your holdings into these few sectors?

Third, not only are the fund expenses super high, but they are charging you an additional 0.5-0.6% "administrative fee", which is code for "we want to extract even more profits from this person". Also I am guessing that there are other hidden fees. I picked one of the funds (Calvert Equity) and looked it up. According to what I see on Google Finance, there is a "load" of 4.75%. That means that when you invest, you LOSE 4.75% right off the top as sales commission.

Fourth, consider that you are not only betting that these active fund managers are going to beat the market but that you are also betting that your financial person knows how to pick the right funds and how to allocate among these funds. That sounds like a losing bet to me.

If I had to guess, this financial person is a salesperson who gets commission for selling these specific funds. He/she probably doesn't have your best interest in mind.

If it were me, I'd walk away.
[emphasis added]

As others have already, and quite rightly, mentioned, this "new suggestion" is good for the advisor and NOT GOOD FOR YOU. Full Stop.

However, in the interest of fairness (whether said advisor/firm deserves it or not, ahem), that "load" may or may not actually apply. In some cases, one of the [very few] advantages of working with an advisor is that these "loads" (which you can consider to be sales commissions paid off the top, leaving you with that much less actually to invest) is that loads might be waived. That "advantage" means that you aren't being hit with something you never wanted in the first place. Not a real bargain!

But there are some "load" funds that have the loads waived simply by virtue of being purchased on your own, with money held at, say, Schwab or TIAA... no need for any "advisor" to help... or collect fees.
So *IF* you wanted some funds that show as having loads, you may be able to get them someplace else without the load. And in this case, saving approximately 5% straightaway is worth looking into this. Don't forget: That "missing 5%" is not compounding for what may be decades, and that could have added quite nicely to the total.

But if there are not loads, it does NOT excuse the use of high fee funds PLUS the overall fee on top of that!

Watty wrote: Sun Oct 17, 2021 9:39 am I would caution you that the person you are dealing with may be very well trained in how to deal with your objections about the high costs. If you give them a chance then they may may very well be a better sales person than you are at resisting sales tactics.
The above comment is important. These advisors are well trained and experienced in dealing with prospective or current clients who question the value of working with them and of paying the assorted fees. It could sound convincing. That's "what they do", and their own income depends upon it.
They are likely to show you PAST returns that show "how much better their choices did" than, say, index funds. But they are able to show this to you after they already know which funds did well over those past years! Did they predict these exact funds X years ago?? Unlikely.
They do NOT have *your* best interests in mind.

RM
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alaska1986
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by alaska1986 »

Enough said i agree. Thanks
exodusNH wrote: Sun Oct 17, 2021 10:25 am
alaska1986 wrote: Sun Oct 17, 2021 8:20 am First off i want to start by saying thank you all for providing some of the best free investment advice on the net. I would like to get some input on a proposal i was given by an allstate financial person to move ex employer 401k funds to ira, it has me thinking about actively managed funds and their expenses vs additional growth potential. On a side note i had read on this forum that once you get above $100-200k mark in your 401k you should start diversifying your portfolio a bit more and incorporating things like growth funds etc although that in itself doesnt mean you have to leave a passively managed account.

So i left my employer april 2021 and left my 401k funds (including yearly aftertax roth ira rollovers) with fidelity mostly because of the vanguard institutional shares. Below are the positions. I'd like your input on

Me:Age 35, salary 110k-120k range
Wife: age 30, 40k salary (will be attending school soon)
Side note: looking to start family soon

Fidelity(funds from rolling out aftertax money from plan to roth ira each year):
Roth ira $115k
Fsggx - global ex us fund $34,800 .06%er
Fskax - total market index $55,300 .02%er

Ex employer 401k - $240k ($91k roth, $149k pretax)
Fxnax - fidelity us bond index $46,400 .32%er
Vfwsx- ftse all word ex us index institutional $21,600 .08%er
Vieix- extended market index institutional $34,200 .05%er
Vinix- institutional index $137,500 .035%er

My CURRENT employer 401k holdings
Principal $13k
Fidelity us bond index fxnax .32%er $1300
Fidelity 500 index fxaix .015%er $7k
Fidelity extended mkt fsmax .035%er $1700
Fidelity total intl ftihx .06%er $3200

CURRENT Wife holdings
Roth 401k etrade $27k vtsax total stock market admiral share .04%er
Roth ira vanguard $8k vtiax total intl stock index admiral .11% er
Traditional ira vanguard $13k
Vbtlx $3k bond market index admiral
Vtsax $10k


PROPOSED MOVE
my $208k roth rollover voya .5% annual recording keeping
Growth portfolio
Aegfx-american funds europacific growth .84%er
Bhsrx- blackrock health science 1.44%er
Csiex- calvert equity .94%er
Sgtrx- columbia seligman global tech 1.56% er
Kaufx- federated hermes kaufmann 1.97%er
Fkdnx-franklin dynatech .85%er
Lgmax-loomis sayles global allocation 1.15%er
Itrax- t rowe price capital appreciation 1.24%er

my $150k traditional rollover
Voya select advantage ira .5%annual recordkeeping fee
Same 8 funds as above in growth portfolio

Wife $13k traditional & $35k roth ira rollover
Voya select advantage ira .6% recordkeeping fee
Same 8 funds as above in growth portfolio

Would appreciate any thoughts on this proposal and general thoughts on paying more fees for more growth potential. I'm aware that many index funds outperform many actively managed funds but I'm sure there are instances where the growth of actively managed funds outweighs the fees and I'm curious to here more on that.
Thanks!
Do not do this.

What you have is great! Leave it alone.

$100-200k is not a threshold to go fiddling with your investments.

This is a sales person selling you on making a move that will hurt you financially. Every 0.5% in fees you pay results in a loss of about $1M over an investing career because it undermines compounding.

This person is very well-trained and knows how to deflect / answer any question you throw at him. Stop talking to them.
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ruralavalon
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by ruralavalon »

alaska1986 wrote: Sun Oct 17, 2021 4:39 pmTo answer at least one of your question no there are no additional fees at my ex employers 401k outside of expense ratio. Those funds are better and cheaper than the options at my current employer 401k so i plan to keep them there. I don't mind the minor inconvenience for the institutional shares
Those tiny differences in expense ratio are probably meaningless in my opinion.

White Coat Investor, Don’t Obsess About Expense Ratios.

S&P 500 index funds, 0.02% difference
Extended market index fund, 0.0015% difference
international stock index funds, 0.02%difference
Bond index fund, 0.00% difference

alaska1986 wrote: Sun Oct 17, 2021 8:20 amEx employer 401k - $240k ($91k roth, $149k pretax)
Fxnax - fidelity us bond index $46,400 .32%er
Vfwsx- ftse all word ex us index institutional $21,600 .08%er
Vieix- extended market index institutional $34,200 .05%er
Vinix- institutional index $137,500 .035%er
alaska1986 wrote: Sun Oct 17, 2021 8:20 amMy CURRENT employer 401k holdings
Principal $13k
Fidelity us bond index fxnax .32%er $1300
Fidelity 500 index fxaix .015%er $7k
Fidelity extended mkt fsmax .035%er $1700
Fidelity total intl ftihx .06%er $3200
Last edited by ruralavalon on Sun Oct 17, 2021 4:58 pm, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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alaska1986
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by alaska1986 »

Thank you this is great intel. I do plan to leave funds with ex employer and will simplify where i can.
shess wrote: Sun Oct 17, 2021 1:05 pm
alaska1986 wrote: Sun Oct 17, 2021 8:20 am Would appreciate any thoughts on this proposal and general thoughts on paying more fees for more growth potential.
Bogle created Vanguard and an S&P index fund back in the 70's under the theory that active management was a wash, since every trade has two sides, and indexing could beat it on net by having lower expenses. For almost 50 years indexing has been fighting the headwind of "It stands to reason that active management has better growth potential", but all along indexing has been grabbing bits of assets year by year. One would think that if active management really delivered on that growth potential, 50 years would maybe be enough time to demonstrate it? And if indexing really didn't deliver, 50 years would be enough time to expose it for a fraud? And yet, here we are.

I spent the early 90's trying to pick the best active manager to get all that growth. I spent the later 90's and early 00's trying to use things like Foolish Four to nab it myself. Then in the late 00's I switched to a core 3-fund portfolio along the lines of the wiki's definition. Looking back at my returns over time, as best I can tell the 3-fund portfolio has delivered all of the returns my previous work had delivered, with a fraction of the effort. I now suspect that in all of my prior efforts, I was simply engaging in factor investing using inefficient tools, and I consider myself lucky that I didn't take any nasty portfolio damage from it.

Anyhow ... given what you presented, I'd probably leave the ex-employer funds in place, but I might consolidate everything into fewer positions. My spouse and I have 2 Roth IRAs and one traditional IRA plus my 401k (which is much larger than the IRA accounts), plus a large taxable account. So I put each IRA into a single position, and our taxable accounts are in a couple tax-efficient positions (broad-market domestic and international funds), and then the big 401k ends up being the rebalancing point for the portfolio. My goal is to keep everything easy to manage, since I mostly never have to touch anything other than the 401k.

I can't even begin to communicate how hard I'd avoid this Voya move. All they are doing is telling you that this problem is too complicated for you to manage, and then they are charging you to make it too complicated for you to understand. Worst thing about it is that their rep probably actually believes they are trying to help you.
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alaska1986
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by alaska1986 »

Ok good point i didnt look at the exact numbers i made an assumption. I should have also mentioned i may be switching employers in the next 90 days
ruralavalon wrote: Sun Oct 17, 2021 4:53 pm
alaska1986 wrote: Sun Oct 17, 2021 4:39 pmTo answer at least one of your question no there are no additional fees at my ex employers 401k outside of expense ratio. Those funds are better and cheaper than the options at my current employer 401k so i plan to keep them there. I don't mind the minor inconvenience for the institutional shares
Those tiny differences in expense ratio are probably meaningless in my opinion.

White Coat Investor, Don’t Obsess About Expense Ratios.

S&P 500 index funds, 0.02% difference
Extended market index fund, 0.0015% difference
international stock index funds, 0.02%difference
Bond index fund, 0.00% difference

alaska1986 wrote: Sun Oct 17, 2021 8:20 amEx employer 401k - $240k ($91k roth, $149k pretax)
Fxnax - fidelity us bond index $46,400 .32%er
Vfwsx- ftse all word ex us index institutional $21,600 .08%er
Vieix- extended market index institutional $34,200 .05%er
Vinix- institutional index $137,500 .035%er
alaska1986 wrote: Sun Oct 17, 2021 8:20 amMy CURRENT employer 401k holdings
Principal $13k
Fidelity us bond index fxnax .32%er $1300
Fidelity 500 index fxaix .015%er $7k
Fidelity extended mkt fsmax .035%er $1700
Fidelity total intl ftihx .06%er $3200
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ruralavalon
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by ruralavalon »

alaska1986 wrote: Sun Oct 17, 2021 5:00 pm Ok good point i didnt look at the exact numbers i made an assumption. I should have also mentioned i may be switching employers in the next 90 days
Then the real questions will be the funds offered, expense ratios, and any additional fees charged in your next employer's plan. I suggest that you wait until you have that information, then decide between the "ex-employer 401k" and the next employer's 401k plan.

The AllState agent's idea of a rollover Voya IRA is still a horrible idea.
Last edited by ruralavalon on Sun Oct 17, 2021 5:12 pm, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Retired Bill
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by Retired Bill »

This is insane. Test the math.

Use a calculator with an annual investment of $6000/year for 40 years at a 10% and 8% rate to represent 100% stocks before and after the 2% annual fees/expenses. Take the difference of the two ending values which represents the total fees over 40 years . I'm working on a spreadsheet but haven't checked all the calculations yet. Anyway I'm showing the market gains would end up split $1,101,216 to voya and $1,314,339 to investor in your situation. That's why those retirement accounts with high expenses just never seem to grow as fast as the market over long periods of time.
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by oldcomputerguy »

humblecoder wrote: Sun Oct 17, 2021 8:46 am Fourth, consider that you are not only betting that these active fund managers are going to beat the market but that you are also betting that your financial person knows how to pick the right funds and how to allocate among these funds. That sounds like a losing bet to me.
In this case it's worse than that. The OP would not be betting simply that the proposed package would beat the market; they would be betting that the proposed package would beat the market by enough to make up for the high fees, and would do it each and every year.

OP, please don't do this.
There is only one success - to be able to spend your life in your own way. (Christopher Morley)
kelvan80
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by kelvan80 »

If possible I would simplify even further by having no more than two funds in each account. Keeping things simple will make it easier to rebalance if you need to and if something happened to you be less overwhelming for a spouse to deal with later on.
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alaska1986
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by alaska1986 »

Got it i will look at things closer and see if i can achieve that. The idea was to have the stocks in the roth accounts and about 25% intl stock, 10% bonds, 65% us stocks (65%/20%/15% large mid small cap)
kelvan80 wrote: Sun Oct 17, 2021 5:30 pm If possible I would simplify even further by having no more than two funds in each account. Keeping things simple will make it easier to rebalance if you need to and if something happened to you be less overwhelming for a spouse to deal with later on.
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by Kenkat »

alaska1986 wrote: Sun Oct 17, 2021 4:34 pm Thank you that makes it an easy decision for me. Nothing better than easy decisions

Kenkat wrote: Sun Oct 17, 2021 9:18 am You are going to get absolutely slaughtered on fees with Voya. With the record keeping fees on top of the high expense active funds, you are extremely unlikely to be able to beat almost any reasonable portfolio made up of low cost funds / index funds. Easily 1.5 to 2%+ of your money is going to get siphoned off every year in fees.
Great to hear - sounds like you are making a good, well informed decision!
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by shess »

alaska1986 wrote: Sun Oct 17, 2021 4:44 pm Copy 10-4

Some times we need to say things outloud to see how foolish they really are. I get the consenus that this is one of those times.

Thanks for taking it easy on me. Im staying put as im doing just fine
I don't know what other people's paths were, but I spent about 15 or 20 years figuring out that there is not a clear and easy magic path available. It really really really seems like there should be. And maybe there would be "all else remaining equal". The problem is that if someone has some magic, then all else does NOT remain equal, and pretty quickly everyone has the magic and the markets reach a new equilibrium. If you repeat that often enough, you reach a state where you can pretty safely assume that anyone who has magical insights and offers to share them with you is either lying outright, or is being manipulated by forces they don't understand (IMHO, a lot of financial advisors simply don't understand what they are doing well enough to understand that they are not doing the right thing for their clients. All their training says that they are doing it to help their clients, and they believe it).

Hmm, tl;dr: If I had a way to reliably make money over the market, I'd use that to make myself wealthy without telling consumers about it (in fact, I'd not tell anyone if I could manage it). If I'm telling consumers about it, I am ipso facto running a scam.

Anyhow, take it easy on yourself. You'll likely have to work through a lot of doubt in the future, too. Even on these forums, I'll see everyone get in a lather about i-bonds or hedgefundie or harvesting credit-card points, and I'll start to doubt myself all over again.
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Re: Proposal to move ex-employer 401k funds from fidelity to voya

Post by beyou »

Note everyone tries to sell outside their strength.
Allstate is know as a property (auto/home) insurance company. I have had such policies for years. But I ignore all their pitches for life insurance and investments. Not their wheelhouse. Please do the same.

There is nothing wrong with Voya, I have a 401k account with ultra low fee funds there and the service is good. But I do not rely in Allstate or anyone to pick funds for me.
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