Vanguard Please Stop Nickel and Diming Me

I just got this notice from Vanguard in my latest statement:


Beginning in the first quarter of 2011, participants in all University of Virginia retirement plans will be charged an administrative fee of $12 per year. The fee will be deducted from each account on a quarterly basis. The first quarterly deduction of $3.00 will be withheld from your account balance and reflected in your first quarter statement. Please note that if you participate in more than one University of Virginia retirement plan, an annual fee will be charged for each plan.

The administrative fee covers the costs associated with record keeping, account statements, participant education, postage, and other services for the retirement plan and its participants. The administrative fee will be deducted from each of the funds in your account on a pro rata basis. For example, if a fund makes up 50% of your account balance, 50% of the fee will be deducted from that fund.

Also Vanguard who claims to have very low expense ratios also has more low balance fees than Fidelity and T Rowe Price (more details to follow in an update tomorrow). I have both a Roth IRA and all my UVA Retirement plans with Vanguard. I’m thinking of moving my UVA retirement to Fidelity and the Roth to T Rowe Price if Vanguard doesn’t do away with this new fee. Our options at UVA are Vanguard, Fidelity and TIAA CREF and Vanguard is the only one charging these new fees. Also my retirement plan is setup as three accounts and I’m sure that I’ll be charged $12 three times.

Interesting Survey from Scottrade + A million bucks

Over at Yahoo Finance! – I read this article from Marketwatch – Young investors heading to the Internet for financial help. If you are in your 20s or 30s and are reading this, you must check it out. After having read that, check out this article from Motley Fool – one of my favorite finance sites (even though they try to pitch their own services at the end of almost every article) – The Lure of Great Wealth. Let me give you some easier to acheive calculations than the article. What if you contributed only 4000 combined in the IRA and 401K, not the 19000 mentioned in the article?. With the rate of 15.4% in that article, you end up with 8 million instead of 37 million – not too bad eh? and doable for anyone! What if you get an average return of only 8% on that instead of 15% on the 4000 – you end up with a million – still not to shabby.

I’m a big supporter of automatic contributions to savings and to acheive 4000 a year, you only need to contribute 333$/month – an easy enough target to reach.

Don’t have a lot of money? You can still get Mutual Funds without fees!

Many fund companies make it easy for small investors to invest in Mutual Funds using automatic investment plans, especially for retirement accounts. Generally low balance fees and account maintenance fees are also waived. Automatic Investment plans also have the added benefit of creating a sustainable investment plan and building savings without too much effort.

A month or so ago, I sat and compared plans from several major fund companies and I found that T. Rowe Price has the best automatic investment plan amongst them all. The plan requires a minimum contribution of only 50$/month per fund and has no custodial or low balance fees of any kind for IRA accounts if you select any of their managed funds (non-index funds) and keep contributing until their regular fund minimums are reached.

Should I put money in my 401 or IRA?

This is one of the very often asked questions on both mimf and mifp.
Based on comments on both newsgroups, here is what seems to make most sense:

  1. Contribute to your 401 upto your employers match (employer match is free money)
  2. Invest in IRA upto the maximum limit (because IRA gives more options than 401)
  3. Invest in 401 upto the maximum limit