Hacker News Reader

Comment by ryporter | Hacker News Reader

Guideline isn't actually "fixing" your 401(k). They are primarily just competing on price. Employers can already get a decent 401(k) from Vanguard, which obviously offers access to their low-cost funds. Guideline doesn't appear to be offering anything fundamentally new (in contrast to, for example, robo-advisors). If I were setting up a 401(k) plan for a company, I'd probably just go with Vanguard, with full confidence that my provider will not undergo any "growing pains" or even cease to exist in 5 years.

View on HN

Hi, I'm the CEO of Guideline. I think you might have fallen into the same trap I did a few years ago. All 401(k) plans are not created equally, and it's not just about the fund menu etc. Vanguard for instance, is not a fiduciary. They will not help you keep your plan in compliance, they will not educate your employees. They don't even do their own record keeping. You will need to pay for those services separately. We are making great 401(k) plans attainable for the small business while focussing on the long term success of your employees.

So you're saying that instead of (for instance) signing up with both Principal (who has the funds) and also TRA (who ... does something) ... a firm just signs up with you and it's a one-stop shop ?

What is the total fee load for your plain old S&P 500 index fund ?

> What is the total fee load for your plain old S&P 500 index fund ?

https://www.guideline.com/pricing

They're just Vanguard + 0.03% custodial fee. So whatever institutional version of VFIAX they can get + 0.03. Maximum 0.08% if they only get the retail investor version (0.05%), minimum 0.03%.

I am waiting on the hammer to fall on 401k. Here is the current situation.

401k is a horrible idea, and its a good way to funnel money from savers. After 2000 & 2008, do you really want to trust the same people who needed bailed out? Yet, 401k is using those institutions to do business with.

401k is a wolf in sheeps clothing. The next down turn, who knows, governments have been known to seize retirement funds. What happens if US Congress decides to do that to save the nation? Look whats happening in the world, it has already happened in the last year in other nations.

My advice, stay out of 401k, put your money where it has intrinsic value, and not a number on a computer screen.

There is no place that'll provide the returns the equities market does, except perhaps a heavily managed rental property.

I strongly disagree.

YTD http://www.barchart.com/commodityfutures/leaders?type=pl&cat...

12 Month looks similar.

Silver, Soybean, Sugar, Gold are up significantly.

Selecting a short time scale is not representative of anything. 401(k)s are meant to be long-term investment vehicles for retirement.

Let's say I've nearly worked 30 years and I'm hoping to retire soon. Had I put my money all in silver, the top performer in your YTD chart, I would have over tripled my initial investment. However, putting my money in the S&P500 would've given me a 10x return over the same period.

When it comes to buying equities or commodities, I typically prefer equities. Companies can innovate and grow and create new value that didn't exist. But a pile of precious metal today is the same pile of metal tomorrow.

Essentially all assets, except perhaps gold^H^H^H^H commodities in your physical posession, are numbers on a computer screen. Even land ownership is controlled by records kept by local governments.

This is clearly true, but the scenarios in which it becomes a problem vary. In an isolated case of data loss/corruption that leaves the title to your home up in the air, there would be other sources of data to appeal to (records at lenders who had paper on the property, etc.) In more apocalyptic scenarios, even your on-hand physical assets won't be good for much (you can't eat gold).

Sure, but the person I was talking to wasn't talking about data loss. He was talking about asset seizure by the state. If they're going to seize my 401k they're just as likely to size my rental property.

And ya, in apocalyptic scenarios the value of assets could swing wildly. I've seen Mad Max though. I'm not buying gold, I'm stockpiling guzzoline.

Intrinsic value is not a thing. Stuff only has value if others are willing to buy it. What others want, and what prices they are willing to pay, change all the time with market conditions and consumer tastes.

Here's an interesting hypothetical of someone who always invests over their life st the worst possible time (right before crashes). He still comes out pretty well

http://awealthofcommonsense.com/2014/02/worlds-worst-market-...

What's the alternative? You can contribute to an IRA instead, but the limits are much lower. Any other investment products on the market will not be tax-advantaged.

The 401(k) was created by Congress (it's even named after the section on the Internal Revenue Code that created it) and that's where its benefits come from. The only way a similar plan would ever emerge is if Congress decides to create that too.

> The next down turn, who knows, governments have been known to seize retirement funds. What happens if US Congress decides to do that to save the nation?

How would the US government do that? Your 401(k) money is held by a private bank; the government would literally have to seize private property, which on this scale and circumstances is completely unprecedented in US history.

Thank you for replying. I did underestimate your company.

I think it would be useful to add to your website a prominent comparison to the entrenched players. I'm probably not the only person to fail to appreciate your advantages over Vanguard, based on your current website (though perhaps I overlooked something). A convincing comparison to the quintessential low-cost provider would deliver quite a powerful message.

Appreciate that feedback. We are really focussed on the product and have not spent enough time on the marketing site. I'll pass on this feedback for sure!

Your comment suggests that Vanguard is low-cost, which it is for the consumer in the form of low expense-ratios. But how do Vanguard's administrative costs stack up for the employer?

I find it insulting when I go to an employer and find they're using a high fee 401k. It just sends so many wrong signals.

And then you ask HR what the fees are and they have no clue.

FWIW this tends to happen with smaller employers that are scrimping on administrative fees. I've found that the situation is generally improving though as people become more aware of what a great 401k plan should look like.

I've also learned to not worry about it so much. You'll generally only stay at an individual employer for a few years. After that you can roll over a 401k into a low fee IRA held by Vanguard (or whomever you prefer). In the end a few years of high fees with a relatively small $ balance shouldn't negatively impact your returns too much. Of course if you're one of those rare folks who spends a decade or more with a single employer you might want to think about things here differently.

> I've also learned to not worry about it so much. You'll generally only stay at an individual employer for a few years. After that you can roll over a 401k into a low fee IRA held by Vanguard (or whomever you prefer)

You can also do a backdoor Roth conversion when you rollover your employer contributions (which can't be Roth contributions.)

Really??? I did not know this. I shall investigate. Not helpful for me personally today but maybe at some point down the road. Thanks!

"Guideline isn't actually "fixing" your 401(k). They are primarily just competing on price."

Isn't the price the key thing needing fixed?

On one level, yes. Excessive fees suck. Bidding them down is great! But it's not the core problem.

The 401k system, as it stands, is designed around extremely confused envy. Rather than allowing workers good tax-advantaged options for their retirement, it aims to give them the same options as The Man who currently employs them, in all his mustache-twirling evilness, irrespective of that Man's complete ignorance about mainstream IRA advice.

Did that otherwise-respectable business have an HR moron set up the plan, and not have index funds? Too bad. What does your retirement savings have to do with your current employer? Why should they be so tightly coupled? Well, no reason, but remember that envy above? The plans require that savings (sorry, "contributions") have some parity with those of highly-compensated employees of that same employer.

A sane system would allow anyone the same (index fund) options as say, federal employees, and not care whether some arbitrary cross-section of workers at a particular employer are saving nearly the same amount. As long as we have these Byzantine rules that put you at the mercy of your current HR department and confusedly envious legislators, we're stuck with it -- that is the problem.

What does the plan-administration-fee look like at Vanguard? Minimizing this number seems to be Guideline's primary value proposition.

Minimizing the number and actually TELLING you the number. Can anyone here even figure out what Vanguard charges? I cannot.

It $20 per year for an individual 401(k) account (commonly used by owners of small businesses).[1] One could assume the rates for regular employer 401(k)s are similar.

That's slightly less than Guideline's 0.03% fee, for accounts with large balances. A $100k account would pay Guideline $30/year, and a $1mil account would pay $300/year. Although most Americans probably don't have that much in their 401(k)s.

Considering a lot of people will have low balances, Vanguard and Guideline cost almost the same.

I think the decision for a small business now comes down to just three factors:

1. Does Guidelines have a better website/app user interface, and better customer service?

2. Vanguard is a well-established company. Guideline is small and new.

3. From the business side of things, is Guidelines easier to work with compared to Vanguard? I.e. with things setting things up, adding new employee accounts, etc.

I'd go with Vanguard just based on factor 2: because they're well-established and fairly trustworthy, and being investor-owned, they're not trying to profit off of their investors.

[1] See: https://investor.vanguard.com/what-we-offer/small-business/i...

I'm Roger Lee, the CEO of Captain401 (YC S15). We offer a robust 401(k) platform and investment advising service that also serves small businesses and startups.

We're more comprehensive and our pricing structure scales more favorably for growing companies. We act as your outsourced HR team by taking care of all of the 401(k) setup, ongoing administration (including sync with all major payroll providers), IRS compliance, and employee support to save you time. It’s a great fit for companies looking to scale.

If you have any questions, let me know! https://captain401.com

Hi Roger, Please elaborate on the more comprehensive comment. We have all you mentioned and more without those excessive AUM fees. We don't outsource core functionality. Captain401k is not a recordkeeper. Your pricing structure also does not account for small businesses and completely disregards the detrimental costs to the plan participants. I'm not trying to pick a fight here, I understand how hard this problem is and the more people focused on it the better. I just wanted to clear up the inaccuracies.

Can a small business just walk up to Vanguard and say, please give me an end 2 end 401(k) solution? With compliance, record keeping, etc?

It was my understanding that they could not, but I could be wrong.

Yes[0] they do that and it is a bit pricey if you are quite small. We investigated them when setting up our 401k and found the fees to be a bit difficult to swallow for a 3 person company.

[0] https://institutional.vanguard.com/VGApp/iip/site/institutio...

Our small company has a SIMPLE IRA through Vanguard. It costs $25/year (waived if you have $50k managed with them across any type of accounts) plus the mutual fund costs, which are very low. Almost no paperwork to get it started.

Definitely worth looking into for small businesses.

SIMPLE IRAs have lower employee and much lower employer contribution limits than 401(k)s.

Any chance you can give a rough number on the costs you were quoted? The linked pages don't mention it at all, as far as I can see.

Eh. The funds are actually held at Vanguard, so you could easily roll this over to them upon failure of Guideline (or even before). This all comes down to what your small employer can do.

Just want to be clear the funds are actually held at the custodian, not at Vanguard. That's why it is super important to have a well established Custodian. You can always rollover your funds in a qualified event to another employee sponsored plan or an IRA. BTW you can do that with most publicly traded funds, and you could also do a cash balance transfer.

Reply on news.ycombinator.com