When I retired, I rolled my 401k balances over to IRA accounts with Vanguard.
My company’s 401k plan was a good one. They even offered my favorite Vanguard fund (VTSAX). But all 401k plans have fees in addition to the underlying fees of the funds where the money is actually invested. This is because of the reporting requirements, paperwork and account holder support that 401k funds provide. Those services cost money so each quarter I’d see some of my money disappearing to pay those fees.
With Vanguard, I pay the underlying fees of the funds and nothing else.
Converting my account was easy. They even assigned an account rep. who monitored the transition and kept me updated on its progress.
I think the account rep. thought I was crazy.
First, for having almost all of my IRA’s in VTSAX.
As I’ve written before, I take a lot of risk with my portfolio–risk other people do not recommend. But I know I will not sell in a downturn (because I haven’t before) and I believe the market will always go up (because it always has over the long-term). So I’m comfortable having the bulk of my invested assets in a broad, U.S. market index. I chose VTSAX because it has extremely low fees of .05%. This is 20 times less than the average fee for this type of fund.
And second, for having so many damn accounts.
But here’s why I have so many–I like to keep track of where the money came from.
The job I took to move up near the future Mr. Ms. Liz and where I met lifelong friends? $37,000 of my retirement is funded from that job. This in spite of cashing out most of my retirement to go back to school.
That job with the insurance company where I learned the traits of the worst boss ever? Well it’s the gift that keeps on giving–I have over $200,000 in my IRA that came from that company’s 401k and almost $51,000 that came from their pension plan. 7 years of cubicle toil celebrated in the financial security it created.
My final (real) job, where I spent the last 17 years, made more lifelong friends and grew into myself gave me the last chunk that allowed me to retire.
Oh, but I could have done better.
When I started my first real job, I was told I was too young to even hear about their retirement plan. This was at a big eight public accounting firm–can you believe it??? Two years of work with nothing to show for it now (other than meeting Mr. Ms. Liz). Even if I’d put just 5% of my salary in, with 30 years of compound earnings I would have over $30,000 today. Dang!
And if I could have skipped the years where I thought I was a great investor and just dropped my money into stock index funds, I’d be waaaaay better off now.
Some of these 401k balances seemed small when I left those jobs. I was tempted to cash these accounts out to buy something I wouldn’t even remember today. But I didn’t, and over time they grew and allowed me to retire. Little sacrifices made consistently help us get where we want to go.
Here’s a fun exercise (especially for my friend Jeff who says I need more numbers in my posts). Calculate your net worth as a percentage of your lifelong earnings.
My U.S. readers can create an account or log onto SSA.gov.to get your earnings by year for your entire life in one spot. Enter your yearly earnings into a spreadsheet and total them.
Divide your net worth into your lifetime earnings. What do you get???
I get 84%! This is a testament to what compound earnings can do. You can spend most of what you earn but still end up with most of what you earn!
What do you get? Do you have any retirement plan horror stories?