2016 Retirement Plan Contributions

[Bandito440]

Hi folks, just a friendly reminder to invest in yourselves now that 2016 is getting closer. The retirement account contribution limits are the same for 2016:

401k/403b/457/TSP: $18,000 ($23,000 if over age 50)

Traditional/Roth IRA: $5,500 ($6,500 if over age 50)

I'm a big fan of Vanguard and their low-cost index funds, but the most important thing is to save and plan for the future. Anything is better than nothing, and even $50 from each paycheck will add up. For $&@% sake, max out any employer contributions. That's free money!

IRS Notice

 

[spackard]

Maybe a silly question but are you allowed catch-up contributions at and above age 50, or just at age 50? For some reason I read this as a one-year only allowable thing to do, just for the year you are 50 years old.

 

[Bandito440]

Originally Posted By: spackard
Maybe a silly question but are you allowed catch-up contributions at and above age 50, or just at age 50? For some reason I read this as a one-year only allowable thing to do, just for the year you are 50 years old.

Catch-up contributions are allowed every year after 50.

 

[jimbrewer]

Looks like Vanguard is about to lose its big cost advantage. Maybe it's time to move to USAA or the next cheapest provider.

 

[dishdude]

Originally Posted By: jimbrewer
Looks like Vanguard is about to lose its big cost advantage. Maybe it's time to move to USAA or the next cheapest provider.


What's going on?

 

[Mr Nice]

I max out my 401K, IRA and voluntary pension every year, so does my wife.

We both put 30% of gross salary for retirement and we also get two traditional company pensions, a concept from the 1950's.

 

[Bandito440]

Originally Posted By: dishdude
Originally Posted By: jimbrewer
Looks like Vanguard is about to lose its big cost advantage. Maybe it's time to move to USAA or the next cheapest provider.
What's going on?

I'm not sure either. Jim, can you provide some details?

 

[cjcride]

Originally Posted By: Bandito440
Originally Posted By: spackard
Maybe a silly question but are you allowed catch-up contributions at and above age 50, or just at age 50? For some reason I read this as a one-year only allowable thing to do, just for the year you are 50 years old.

Catch-up contributions are allowed every year after 50.

We have a catch up thing in Canada too.
It's like a snooze button, it tends to make us put off something that should be topped up a little each year. Finding a bunch of surplus cash to catch up with at a later date is a tough one.

 

[Cutehumor]

Originally Posted By: Bandito440
Originally Posted By: dishdude
Originally Posted By: jimbrewer
Looks like Vanguard is about to lose its big cost advantage. Maybe it's time to move to USAA or the next cheapest provider.
What's going on?

I'm not sure either. Jim, can you provide some details?


http://www.newsweek.com/vanguard-whistleblower-tax-dodge-complaint-400901

Vanguard might be a tax shelter claims whistleblower. They might owe IRS Billon's in back taxes. All vanguard expense ratios will reflect any taxes owed back. See link above for more information

 

[Vuflanovsky]

This has been in the news for a few weeks. It'll be interesting to see how far this goes and potentially how it changes Vanguard's model. They're essentially a non-profit and if it DOES come to pass that they can't continue to operate in this way due to the tax codes and service transactions at what are considered non-market rates, then Vanguard will undoubtedly have to increase fees and expenses beyond any fines.

They don't have to disclose anything now in terms of salaries, etc. so it might possibly be a shock to them and others when it has to be revealed that some of their managers are compensated considerably more than competitors just due to their size and ability to do so. If true, that's probably not what Jack Bogle imagined but then again I don't think the WalMart of today is what Sam Walton imagined either.

 

[Mr Nice]

If Vanguard is forced to significantly increase their expense ratios, then you transfer to another company. No big deal.

My 401K is in Fidelity, IRA in Vanguard and brokerage account TDameritrade.

 

[JHZR2]

Originally Posted By: Mr Nice
If Vanguard is forced to significantly increase their expense ratios, then you transfer to another company. No big deal.

My 401K is in Fidelity, IRA in Vanguard and brokerage account TDameritrade.



I don't have a big vanguard stake at all, but it is a big deal. It's a hassle, and the hassle, if one is going to play the time value bit, is high.

What is interesting is this:

"Sorensen acknowledges that “this is not the prototypical Section 482 case,” in which tax havens are used to hide profits offshore, because Vanguard seeks no profits."

So if that's truly the case, and Vanguard is there for the betterment of the population with no intent of profit, I don't get how this is hard to fix. Gi an how crooked a lot of non profit stuff is in terms of making profit for some of the people at the top, I can't see why this can't be worked out... Other than the payday for the irs.

If vanguard is primarily indices and etfs, what strikes me as more questionable is how other for profit investment houses are selling products with similar fee structure as vanguard, since that would smell to me of a similar transfer cost game, maybe worse since the rest of the company is for profit.

 

[dishdude]

I hope they are able to fight this off, I like Vanguard a lot. I have my IRA and brokerage account with them and would hate if I had to make a move.

 

[Mr Nice]

I posted before, my Fidelity fees are lower than Vanguard. If Vanguard had crazy high fees they would be accused of being crooks and gouging their clients.

My IRA transfer took 3 weeks, I just needed my credit union to stamp some paperwork.

 

[Vuflanovsky]

If the ruling goes against Vanguard, it'll be interesting to see how much in outflows that will create. Vanguard has some good funds but they certainly don't come near cornering the market on the best mutual funds.

If Jack Bogle's recent low return prognostication for the next few years comes to pass, it'll likely move people away from indexing that aren't sworn to it anyway if they can get a better return with the "best" funds/managers and it's a stock pickers market. You're even seeing it this year if someone is heavily weighted in an S&P 500 Index fund for example.

 

[supton]

Very interesting. I had been tempted to start a Roth at Vanguard. Well, still am but I guess now I should keep an eye on this.

My 401k was just rolled into a Vanguard Target fund--will those be impacted likewise?

 

[Mr Nice]

Most likely fees across the board will be raised on all expense ratios (target date, ETF's and mutual /bond funds) if they lose the court case. I hope they win the case against them. Seems like the lawyer wants a percentage of whistleblower settlement.


Vuflanovsky,
Yeah I also saw an interview where Bogle said low growth for the next few years. My 401K is up almost 11% (due to company stock) verses the S&P 500 of 3.6%

Who else offers as good or better mutual funds than Vanguard ?

 

[Bandito440]

Originally Posted By: supton
Very interesting. I had been tempted to start a Roth at Vanguard. Well, still am but I guess now I should keep an eye on this.

My 401k was just rolled into a Vanguard Target fund--will those be impacted likewise?

Nobody really knows. If they raise the expense ratios and you can find a better (lower cost) target fund somewhere else, it'll be worth considering. For right now, Vanguard is still the king of low fees. I hope this just fizzles out.

The best time to start saving is yesterday. Open that Roth IRA with the knowledge that you can always transfer it elsewhere with ease.

Originally Posted By: Mr Nice
Who else offers as good or better mutual funds than Vanguard ?

In index funds, nobody has anything better that I've seen. There are multitudes of companies that offer them. Aside from expense ratios, there isn't much to consider when comparing index funds, unless you prefer some company's minimum deposits, mobile app, or something along those lines.

If you're looking for something actively managed, the big names all have their own. I looked at the Primecap Odyssey Growth Fund a while back. It's weighted heavily toward healthcare, which has been great for a while now, but who knows what the future holds.

 

[Vuflanovsky]

Originally Posted By: Mr Nice
Most likely fees across the board will be raised on all expense ratios (target date, ETF's and mutual /bond funds) if they lose the court case. I hope they win the case against them. Seems like the lawyer wants a percentage of whistleblower settlement.


Vuflanovsky,
Yeah I also saw an interview where Bogle said low growth for the next few years. My 401K is up almost 11% (due to company stock) verses the S&P 500 of 3.6%

Who else offers as good or better mutual funds than Vanguard ?



My comment wasn't to say anything disparaging about Vanguard, only that what might be considered among the "best" funds ( qualified in different ways ) are not necessarily Vanguard funds. There are some excellent funds from T. Rowe Price, Fidelity, and others that are comparable to what Vanguard offers in the same category.

It might also hinge on how married you are to the concept of indexing ( and by extension low fees ) versus also using actively managed funds...but the last time I looked, Vanguard still had more actively managed offerings than passive ones even though they're known for index funds.

Unfortunately, many of the particularly good actively managed funds remain closed to new investors. Example: I have a decent amount in T. Rowe Price Capital Appreciation which IMO is a great allocation / balanced fund but closed in June 2014. TRP also closed their Health Science and New Horizons funds ( I have both ) which have been excellent performers.

Personally, it always scares me when there's a big delta between the S&P 500 index gain for the year ( piddling ) and what my 401k or IRA ( minus contributions ) has done for the year. Not a bad problem to have I know...

 

[Mr Nice]

Why close the funds if they are doing well ?