tag:blogger.com,1999:blog-22906998.post7502199233743231994..comments2024-03-26T22:42:06.412-07:00Comments on TAG Blog: Simple, Cost-Efficient InvestingSteve Huletthttp://www.blogger.com/profile/05537689111433326847noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-22906998.post-58842290233400494382013-06-02T15:38:12.028-07:002013-06-02T15:38:12.028-07:00To reiterate: The TAG 401(k) Plan is going to the...To reiterate: The TAG 401(k) Plan is going to the lowest-cost version of every fund in its lineup. (PIMCO, for instance, drops its costs substantially. And the S & P 500 index will drop from 21 basis points to 8 basis points)<br /><br />Right now, the Vanguard Target Retirement Funds are EXACTLY the same cost on the TAG 401(k) platform as they are at Vanguard. What will be changing is that if Plan costs aren't covered by cash flow from offered funds, there could be a slight <i>pro-rata</i> charge going forward.<br /><br />As I say in enrollment meetings: 75% of corporate 401(k) Plans offer a match of some kind, but if you aren't with the company long enough the match is taken back. <br /><br />(Example: Viacom's 401k Plan has a vesting period of two years for its matching contributions. If you're with Viacom's Plan for 1 year and 11 months, ALL of the match is taken back. Other corporate plans have graduated vesting: you get 25% of the company's match after a year, 50% of the match after 2 years, and so on.)<br /><br />In my opinion, the main reason to participate in a 401(k) is the tax deferral aspects. Contributions are tax deferred for state and federal taxes up to $17,500, and up to $23,000 if you turn fifty in 2013.<br /><br />There are 2200 participants in the TAG 401(k) Plan. The average account holds $70,000.<br /> Steve Huletthttps://www.blogger.com/profile/05537689111433326847noreply@blogger.comtag:blogger.com,1999:blog-22906998.post-86822434457768777142013-06-02T10:17:09.461-07:002013-06-02T10:17:09.461-07:00Traditional IRA limits are $5,500 for this year (6...<b><i>Traditional IRA limits are $5,500 for this year (6,500 if over 50), and spouses can contribute that amount too...</i></b><br /><br /><a href="http://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits" rel="nofollow">According to the IRS</a>, not everyone can get a tax benefit from a Traditional IRA:<br /><br /><i>"Your deduction may be limited if you (or your spouse, if you are married) are covered by a retirement plan at work and your income exceeds certain levels."</i><br /><br /><b><i>So unless you can afford substantially more than the IRA limits, why go with the 401k plan?</i></b><br /><br />A 401(k) offers <a href="http://thefinancebuff.com/case-against-roth-401k.html" rel="nofollow">tax-advantaged space</a> for retirement savings regardless of income or employer retirement plan coverage. An animator who cannot receive a tax advantage from an IRA can still receive a tax benefit by contributing to a 401(k).<br /><br />An animator who can contribute the max to an IRA should *still* consider contributing additional funds to a 401(k). When the animator gets laid off, s/he can rollover all of the savings in the 401(k) to even cheaper funds in a Traditional IRA at Vanguard.<br /><br />If the animator NEVER gets laid off, s/he still has the opportunity to invest the 401(k) savings in reasonably priced index funds.<br /><br /><b><i> There are no matching funds either, which was one of the main reasons to be in a 401k.</i></b><br /><br />An employer match is an incentive to save for retirement, but it is not a reason to invest in a 401(k). The only reason to shun a 401(k) is if the fund choices are so poor that <a href="http://assetbuilder.com/blogs/scott_burns/archive/2007/03/10/the-long-term-cost-of-high-investment-expenses.aspx" rel="nofollow">saving in a taxable account would be less expensive</a>.Celshaderhttps://www.blogger.com/profile/06835531857425033524noreply@blogger.comtag:blogger.com,1999:blog-22906998.post-28613165780022450962013-06-02T07:14:42.967-07:002013-06-02T07:14:42.967-07:00Owning an index fund works because most funds don&...Owning an index fund works because most funds don't beat their relative benchmarks which are usually indexes. Managing funds takes considerable skill and talent (much like our jobs!). Creating an index is accomplished without a trading model in mind. Indexes have a different criteria and are not changed around very frequently. For example, the list of stocks in an index like the S&P 500 is far more constant than the most mutual funds....less churn (turnover, trading in and out)...and some say...less of a chance of making mistakes.<br /><br />...but plenty of them do beat the market and are run by great managers. Look at performance net of fees and diversify to suit your investment profile. Certified financial planners can be a great help here. Taking into consideration your age, risk tolerance, and life goals.<br /><br />Without guidance, often the inclination will be to buy too many funds, to over diversify....at that point you are coming closer to owning the whole market so index funds would be a better choice than doing that. <br /><br /><br />Dave Randhttps://www.blogger.com/profile/13933955142101497086noreply@blogger.comtag:blogger.com,1999:blog-22906998.post-62738464327972320412013-06-01T22:59:43.835-07:002013-06-01T22:59:43.835-07:00Yes, the fees in most funds can really add up, but...Yes, the fees in most funds can really add up, but on top of that there is the additional fees for the 401k plan itself. If I may play devil's advocate, many would be better off investing via a traditional IRA in index funds such as Vanguards which have super low fees. That way the fees for the 401k "middle man" are avoided. <br /><br />There is really only one reason to use the guilds 401k plan, which is the higher contribution limits. Assuming you can afford to contribute the higher levels, which is difficult in this tough economy. Traditional IRA limits are $5,500 for this year (6,500 if over 50), and spouses can contribute that amount too. So unless you can afford substantially more than the IRA limits, why go with the 401k plan? There are no matching funds either, which was one of the main reasons to be in a 401k. Joel Fletcherhttps://www.blogger.com/profile/11473257355394926172noreply@blogger.com