Wags target date fund, total fees?

[Charcoales]

Is the wags target date 401k fund a scam?

Just looking if anyone knows how it compares to others. The investment summary is confusing as hell, I simply want as much funds in low expense ratio areas as possible (preferably vanguard imho), and as low fees as possible.
I see so far fees of $7.33 every 3 months. And that some of the investments are being put into fund with expense ratios from 0.24% to .74%!

Please advise

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[Momus]

Doesn't help if you don't list all the funds with ER here and how much total you have in what funds.

 

[963880]

Is the wags target date 401k fund a scam?

Just looking if anyone knows how it compares to others. The investment summary is confusing as hell, I simply want as much funds in low expense ratio areas as possible (preferably vanguard imho), and as low fees as possible.
I see so far fees of $7.33 every 3 months. And that some of the investments are being put into fund with expense ratios from 0.24% to .74%!

Please advise

I didn't put anything in those target funds for the same reasons you pointed out + other reasons. You also can't purchase Vanguard funds with this program. It's not an option. You have to open your own IRA or individual brokerage account to purchase Vanguards at places that offer them.

 

[WVUPharm2007]

CVS' Target date is a reasonable 0.21%. Wags needs to up their 401k game.

Give us the options with ERs and we can help.

 

[Charcoales]

CVS' Target date is a reasonable 0.21%. Wags needs to up their 401k game.

Give us the options with ERs and we can help.

Any other fees with cvs u are aware of? I just see the maintenance fee of $7.33 per 3 months right now in addition to the expense ratios. Any fund cvs uses higher than the .21%?

 

[pezdispenser]

Here are the fund options. The first number is the expense ratio and the second number is the 1 year return for 2018. I only included one of the target date funds. Also if you look in that fund's fact sheet, it says gross expense ratio 0.06%, so I'm not sure which one is correct.

Target Retirement 2055 Fund 0.04 -7.97
Holdings:
Northern Trust US IMI Index Fund - Non Lending 38.37%
Northern Trust ACWI ex-US IMI Index Fund - Non Lending 34.69%
Northern Trust High Yield Fund - Non Lending 9.12%
Northern Trust Global Real Estate Index Fund - Non Lending 5.43%
Northern Trust Commodity Fund - Non Lending 3.71%
Northern Trust 1-10 Year TIPS Index Fund - Non Lending 1.71%
Northern Trust Aggregate Bond Index Fund - Non Lending 6.97%

Index Funds
S&P 500 Index Fund 0.02 -4.42
Russell Small Cap Completeness Index Fnd 0.04 -9.17
Bond Index Fund 0.03 -0.01
International Stock Index Fund 0.08 -14.57

Active Funds
Stable Value Fund 0.37 2.02
Bond Fund 0.25 -0.22 (comparable to Bond Index Fund)
Large Company Stock Fund 0.24 -4.81 (comparable to S&P 500 Index)
International Stock Fund 0.68 -15.90 (comparable to International Stock Index Fund)
Small/Mid-Size Company Stock Fund 0.55 -8.45 (comparable to Russell Small Cap Index)
WBA Stock Fund 0.03 -3.51
Real Asset Fund 0.74 -7.61
V.I.P. (Voluntary Investment Plan) Fund 0.39 2.16

The target date funds are not made up of any of the other index funds or active funds. Even though their expense ratios are very low, they contain a lot of international, real estate, commodities, TIPS and bonds, which I don't like.

I put the index funds that four of the active funds are directly comparable to. For large scale mutual funds, I don't believe active management can consistently beat the index after fees, so I recommend just using the index funds.

So if you want to mimic a target date fund without real estate and commodities, you can use:
- S&P 500 Index Fund and Russell Small Cap Completeness Index Fund in a 4:1 ratio which covers the US total stock market.
- International Stock Index Fund in whatever ratio you choose to the sum of the above 2 US funds. Vanguard does 60% US : 40% Intl. I do 80:20.
- You can start shifting to bonds as you get older.

And yes, there is a $7.33 per quarter fee or $29.32/yr, but as your balance grows the percentage gets lower and lower. e.g. at $100k it's 0.03%.

 

[Charcoales]

Here are the fund options. The first number is the expense ratio and the second number is the 1 year return for 2018. I only included one of the target date funds. Also if you look in that fund's fact sheet, it says gross expense ratio 0.06%, so I'm not sure which one is correct.

Target Retirement 2055 Fund 0.04 -7.97
Holdings:
Northern Trust US IMI Index Fund - Non Lending 38.37%
Northern Trust ACWI ex-US IMI Index Fund - Non Lending 34.69%
Northern Trust High Yield Fund - Non Lending 9.12%
Northern Trust Global Real Estate Index Fund - Non Lending 5.43%
Northern Trust Commodity Fund - Non Lending 3.71%
Northern Trust 1-10 Year TIPS Index Fund - Non Lending 1.71%
Northern Trust Aggregate Bond Index Fund - Non Lending 6.97%

Index Funds
S&P 500 Index Fund 0.02 -4.42
Russell Small Cap Completeness Index Fnd 0.04 -9.17
Bond Index Fund 0.03 -0.01
International Stock Index Fund 0.08 -14.57

Active Funds
Stable Value Fund 0.37 2.02
Bond Fund 0.25 -0.22 (comparable to Bond Index Fund)
Large Company Stock Fund 0.24 -4.81 (comparable to S&P 500 Index)
International Stock Fund 0.68 -15.90 (comparable to International Stock Index Fund)
Small/Mid-Size Company Stock Fund 0.55 -8.45 (comparable to Russell Small Cap Index)
WBA Stock Fund 0.03 -3.51
Real Asset Fund 0.74 -7.61
V.I.P. (Voluntary Investment Plan) Fund 0.39 2.16

The target date funds are not made up of any of the other index funds or active funds. Even though their expense ratios are very low, they contain a lot of international, real estate, commodities, TIPS and bonds, which I don't like.

I put the index funds that four of the active funds are directly comparable to. For large scale mutual funds, I don't believe active management can consistently beat the index after fees, so I recommend just using the index funds.

So if you want to mimic a target date fund without real estate and commodities, you can use:
- S&P 500 Index Fund and Russell Small Cap Completeness Index Fund in a 4:1 ratio which covers the US total stock market.
- International Stock Index Fund in whatever ratio you choose to the sum of the above 2 US funds. Vanguard does 60% US : 40% Intl. I do 80:20.
- You can start shifting to bonds as you get older.

And yes, there is a $7.33 per quarter fee or $29.32/yr, but as your balance grows the percentage gets lower and lower. e.g. at $100k it's 0.03%.

Hmm this 401k plan looks not worth it compared to straight low expense ratio vanguard.

Instead of maxing 401k, I might be better off doing only the 4% match, $5500 ira, and paying off 5.5% student loans for now? After that, open an after-tax vanguard account?

 

[mentos]

Hmm this 401k plan looks not worth it compared to straight low expense ratio vanguard.

Instead of maxing 401k, I might be better off doing only the 4% match, $5500 ira, and paying off 5.5% student loans for now? After that, open an after-tax vanguard account?

That's a good plan. I personally would only do the 401k match and pay off student loans (refinance for a better rate) before doing anything else cause I hate debt. After that, you should max out Roth IRA then 401k before investing in taxable account.

 

[Gombrich12]

Here are the fund options. The first number is the expense ratio and the second number is the 1 year return for 2018.

Index Funds
S&P 500 Index Fund 0.02 -4.42
Russell Small Cap Completeness Index Fnd 0.04 -9.17
Bond Index Fund 0.03 -0.01
International Stock Index Fund 0.08 -14.57

Those are great expense ratios, you can do a 3-fund portfolio with the S&P, Bond, and International funds.

 

[WVUPharm2007]

Hell, those look nice.

 

[PharmDBro2017]

Those are great expense ratios, you can do a 3-fund portfolio with the S&P, Bond, and International funds.

Depending on age and other investments, this is likely OP's best and safest choice.

 

[Momus]

Hmm this 401k plan looks not worth it compared to straight low expense ratio vanguard.

Instead of maxing 401k, I might be better off doing only the 4% match, $5500 ira, and paying off 5.5% student loans for now? After that, open an after-tax vanguard account?

All of the funds pez listed are cheap and comparable to Vanguards. Administration costs of 0.03% is also very reasonable.

The target date funds are also very cheap. You can compare its past performance to dow Jones target date indices, the benchmark for target date funds. If the performance is lagging, you may want to stick with a couple index funds.

Max out your 401k. Pick a combination of domestic, small cap and international stock index funds. Anything between 10-40% in international is reasonable.

It takes total ER exceeding 1.5% to make contribution to 401k to not make sense. Contribute away.

 

[pezdispenser]

Hmm this 401k plan looks not worth it compared to straight low expense ratio vanguard.

Instead of maxing 401k, I might be better off doing only the 4% match, $5500 ira, and paying off 5.5% student loans for now? After that, open an after-tax vanguard account?

The index fund expense ratios are comparable to Vanguard, and the fees are not even a major factor compared to the tax benefits of a 401k. The 401k is pre-tax so you will have 24% more money (actually 31.6% of the after-tax amount) invested in your account working for you, instead of paying 24% tax up-front and investing what's left in an after-tax account. Taxes are also deferred in the 401k so it compounds and grows tax free, while in an after-tax account you will pay 15% tax on dividends every year and 15-24% on any realized capital gains. You do have to pay taxes on the 401k when you retire and make withdrawals, but if you get your mortgage and everything paid off, your expenses should be low and you can probably stay in the standard deduction, 10% and 12% tax brackets.

You can only deduct a traditional IRA if your income is below $64k single or $103k MFJ, so the 401k is your only choice for pre-tax investing.

I would only do a Roth IRA, backdoor Roth or mega backdoor Roth after you have maxed out your $19k 401k, because after you account for the 24% tax that you pay up-front on any of these Roth options, the 401k works out better.

Whether to pay off 5.5% student loans or to invest is debatable, but I would do the 4% match and put the rest towards paying off the loans because it's hard for your investments to beat 5.5% after-tax (7.2% gross) and adjusted for risk. It will also free up a lot of cash flow once the loans are paid off, so that you can save up for a house or build up your investments very quickly.