By JLP | October 28, 2013
A friend of mine gave me her 401(k) information to look at. Her company changed 401(k) providers and went with Nationwide. I wasn’t fond of their previous 401(k) provider (I forget the name now), so I was happy to see a change.
I flipped through the information packet and landed on the page listing their options. I was pleased to see companies like DFA, Vanguard, American Century, etc. Expense ratios for the funds were fairly low too (the highest was 1.21% for a SmallCap value fund).
Then I turned the page…
IN ADDITION to the mutual fund expenses, Nationwide tacked on an additional annual management fee ranging from 1.02% to 1.27%.
So…the Vanguard Index 500 Signal Class, with a .05% management fee, now had a 1.32% annual fee! FOR AN INDEX FUND!!!!!
Now, I know why companies do this. Small companies are struggling. Health insurance premiums are going up. Gas is expensive. So, a broker or advisor comes along and offers a 401(k) plan that is really cheap to the business owner and the costs to the employees are either glossed over or buried in the information. Sadly, most employees don’t have a clue.
To give you an idea of the impact of a 1.27% additional fee, I ran some numbers. I assumed an employee socking away $10,000 per year in the S&P 500. Using monthly returns, I calculated that at the end of 10 years (2003 – 2012), the 1.27% annual fee would have lead to a loss of $8,800 to fees (you can see my numbers here). That’s a sizable chunk of change.
My advice would be to only invest enough to get any company match and then max out a Roth IRA (assuming you qualify) or a traditional non-deductible IRA. There is no sense in throwing away money due to useless fees.
By JLP | October 27, 2013
Charging drivers by the mile.
Anyone who lives outside of New York City or any other big metropolitan area, will not like this idea.
I loathe any idea that adds a new way to tax people. Why? Because the old taxes rarely get done away with. There is a gasoline tax already. There are also lots of toll roads that charge by distance driven. WE DON’T NEED ANOTHER WAY FOR GOVERNMENTS TO GET MORE TAXES.
The above article mentions that this is necessary because the roads are in need of repairs. Wasn’t TARP supposed to be for roads? We have zero accountability in how the government spends the money it receives.
By JLP | October 23, 2013
I found this link to this spelling quiz on facebook. I took the quiz last night and scored a whopping 78%.
Take it and if you aren’t too embarrassed, post your results in the comments.
By JLP | October 22, 2013
From today’s WSJ (How Government is Making Solar Billionaires):
Welcome to SolarCity, SCTY -0.59% the latest booming green company that has never recorded a profit. The startup’s stock price has soared by 600% since its IPO last December—it closed on Monday at $57 a share—and spiked after the company announced a couple of weeks ago that it expects business to grow by 70% to 90% next year. Yet the company, based in San Mateo, Calif., and specializing in deploying rooftop panels, ended the first six months this year $61 million in the red.
Ordinarily, that sort of number might disconcert investors. But SolarCity’s business model is powered by government subsidies, which also fueled the 500% stock run-up and turn to profit this year of the electric-car maker Tesla. Steering both companies is Elon Musk.
In addition to being the chairman of SolarCity and CEO of Tesla, Mr. Musk is the largest shareholder in both companies. The increase in their stock prices has raised his net worth by more than $5 billion over the past year.
Isn’t that lovely?
Yes, I am aware that the government also helps other industries. The point is the government really should get out of all business creation and promotion. The government should not be deciding who is or is not successful. If your idea cannot succeed in the market place on its own, then you need a different idea. Mr. Musk has the U.S. taxpayers to thank for his wealth.
Discuss among yourselves while I go paint the master bedroom…
PS – If you can’t read the link, email me (JLP – at – AllFinancialMatters.com) and I’ll get you a copy.
By JLP | October 22, 2013
We found out a couple of months ago that we are going to be moving. With a senior in high school and another right behind him, the timing is horrible. My wife didn’t feel like she could turn this job down. We managed to stay in the same house for 14 years.
Our house wasn’t ready to go on the market, so I’ve been spending a lot of time getting it ready to sell. Combine remodeling with taking care of kids and all the other household stuff, and it leaves little time for AFM.
Anyway, AFM’s not going away. I’m just too busy to even think about blogging. I have come across great material recently but haven’t had the time to post about it. I do have one post in the works that will blow your mind (at least I think it will).
Take care and please remember my family and me in your prayers.
By JLP | October 7, 2013
If you have an iPhone or iPad running iOS7, chances are pretty good that you have had an issue with iMessage. I and my son were having issues with it. I would type a message, hit send, the blue send notification bar would get almost to the end and stop and just sit there. Very annoying.
Anyway, my son found a fix that has worked for both of us.
Settings > Messages
• Turn off iMessage
• Wait a few seconds and turn iMessage back on
• Do a power cycle of your iPhone by holding down the home button and the button at the top right corner of the phone down at the same time until the Apple icon pops up on the screen.
• Once your phone is powered back up, it should work.
By JLP | September 24, 2013
I’m not a CFP, but I have been following what’s going on with the CFP Board and their members who use “fee-only” as their compensation method.
Apparently, the board removed “fee-only” from all members’ profiles after it was reported that certain individuals were calling themselves “fee-only” when they were not.
Now people are claiming that the “fee-only” rule was too vague.
It’s pretty simple, really. If you are “fee-only,” you are FEE-ONLY! Meaning, your fees are paid directly by the client. That’s it. If you get paid by a third party (other than portfolio management fees through Schwab or Fidelity), then you are not fee-only.
It doesn’t surprise me that stock brokers would move to call themselves “fee-only.” The compensation method is gaining in popularity as the public becomes more aware. I’m sure brokers are losing business to “fee-only” planners. What better way to combat the loss of clients than to simply call yourself a “fee-only” planner?
It’s sad and it only confuses clients.
So, the CFP Board should inspect their licensee’s compensation method and fine or revoke the licenses of those who are lying. Pretty simple if you ask me.