Sgt.Sausage wrote:

[...]
- quote -

The IRS Pub you want is 560. My brief review finds only that, whether
using SEP or SIMPLE plans, *all* eligible employees must be included.

Why you could not have just added employees into your existing SEP, your
CPA (Wife) should be able to answer.

-Mark Bole

<woessner[at]gmail.com> wrote in message
news:1157657265.540005.70650[at]e3g2000cwe.googlegroups.com...
- quote -

This is correct, but perhaps not for the reason you think. American Funds
offers many share classes; most but not all have loads. The share class
offered to the OP is class R3. (American Funds used to be one of the "good
guys" of load funds, keeping out of the multiple share class game, but has
gone over to the dark side, offering 14 different classes now!)

Share classes R1-R5 are retirement plan share classes that differ
essentially in the size of their 12b-1 fees (R5 has no 12b-1 fee, and no
front/back loads). By law (actually NASD rule 2830(d)(4)) - not by "popular
opinion" - R3 shares (with 0.50% 12b-1 fees) are load funds.

http://www.sec.gov/answers/mffees.htm#salesloads (See "A Word About No-Load
Funds)

Why does all of this matter? American Funds are generally good, low cost
funds. In plans that offer class A (front end load, small 12b-1 fee) shares
with the load waived, they can serve as the foundation of a solid retirement
plan. But, once one adds in higher 12b-1 fees, these funds become less
attractive. For example, the Bond Fund of America R3 class has total
expenses of 1.02%, which is much too high for a generic bond fund.

It is pretty easy to find solid noload large cap funds with expenses under
1% (most of the R3 funds offered to the OP have expenses around 1%), so that
makes the R3 domestic offerings respectable, but not a first choice.

EuroPacific Growth, even at the R3 expense ratio of 1.11%, is relatively
cheap (for a foreign fund) and historically an outstanding fund. It is a
great core foreign fund, in part because it contains a healthy dollop of
emerging markets (so it is better diversified than most foreign index funds
that track only developed markets represented in the MSCI EAFE index).

Since the OP was talking about investing $3K/year, which is under the IRA
annual limit, (see original post in misc.invest.mutual-funds), putting
about 1/4 into EuroPacific Growth, and 3/4 into an IRA (domestic equity) is
an approach worth considering. (The OP said there was no 401(k) matching
now.)

With matching, I would look for the best domestic fund to pair with
EuroPacific Growth. I would tend to avoid Mutual, as it has underperformed
its peers for years. Growth Fund of America has been a solid performer for
years - though a concern is that it is the biggest fund - too bloated even
for a large cap fund. But so far, it seems to be able to handle that.

Mark Freeland
BnetOnewsX[at]sbcglobal.net

<heportillo[at]gmail.com> wrote in message
news:1157640701.821928.63990[at]i42g2000cwa.googlegroups.com...
- quote -

I'm not going to comment on the options -- others here are better at
that and will likely do so.

***

I'll offer up a friendly suggestion: Eventually, you should be doing a
minimum of 12-15%, and better if you can get more.

I started where you were, at 6% -- and hated it, but knew I had
to do it. I then took a portion of each annual raise and put it towards
the retirement contributions. If, say, one year I got a 5 % raise -- I'd
make it a 3.5% raise instead, opting to put the other 1.5% into the
retirement account. Next year a 7% raise, take 5% in pay and 2%
added to the contribution. Bad year and only get a 2% raise? take
1.5% on your paycheck and put the extra .5 % in the 401.

Do this for 5 or 6 years and bingo, you're maxing out the
contributions without even really knowing it, or twisting
your stomach in knots.

Worked for me. At this point, I was maxing out our plan
(we have a SIMPLE and not a 401K -- a bit lower on
maximum contribution limits). After about the 5th or 6th
year, I was able to take the full raise on the paycheck 'cause
I couldn't put more in the SIMPLE plan. Then the taxable
investments started (past the limits for an IRA and Roth --
neither are deductible for us 'cause we're way over the income
limits). Then did the same with the taxable accounts. Started
w/ 2% of the paycheck and raised the contributions with every
annual raise. There is no maximum here. The sky's the limit.

Between our plans at work and our taxable accounts, the
wife and I are near 30% of gross being invested in the
markets, and another 20% being invested in real estate
and other businesses we run.

Just don't get greedy on payraises or other "sudden windfalls"
(tax returns, inheritances, lottery winnings <grin> ) -- take 'em
all with a "some for me, right here, right now, and some for
the future me in 10, 20, 30 years". Always set aside a good
portion of any "found" money. You'll be glad you did.

***

I don't mean to hijack the thread, but this just brought up
a nagging question that's been bothering me for years.
Before I had employees, I contributed to a SEP plan.

After employees, we setup a SIMPLE plan for the employees
but the CPA (Wife) told me I had to quit the SEP and join
the plan we offered to the employees. I never really verified
this myself -- but she's the CPA and she wears the "financial
pants" in our household.

I liked the SEP as the contribution limits were *significantly*
higher.

Can anyone point me to the official tax code or IRS pub that
states that if I offer my employees a plan, I have to be enrolled
in that plan? Thanks in advance.

<woessner[at]gmail.com> wrote
- quote -

The mutual fund names that the OP gave are insufficient to
identify the exact funds. At misc.invest.mutual-funds today,
the OP elaborated and gave the fund symbols. None of the
funds are front or back loaded funds. Most or all do have
12b1 fees, which some call a "load." Either way, the expense
ratios and 12b1 fees range in total from about 1% to 2% for
each fund. Nothing too gosh awful for a 401(k) with
matching.

To the OP: People at MIMF asked for the fund symbols so they
could go to www.morningstar.com , www.finance.yahoo.com,
possibly American Funds' web site, etc. to quickly get a
profile of the funds you listed. Ultimately info at these
sites should be double-checked with the actual fund
prospectus, since errors do occur on consumer sites. You
should try looking up the symbols yourself, so you can get
better at understanding investing research. If anything does
not make sense, just keep asking...

- quote -

Well, these are all loaded funds, which is unfortunate. Hopefully
American Funds (the mutual fund company that owns all these funds) is
cutting you guys a break on the load since you're 401k investors.
Otherwise, you can kiss up to 5.75% of every dollar invested goodbye.

The Growth Fund of America (AGTHX) has historically been a good
performer. It recently overtook VFINX (Vanguard's S&P 500 index fund)
as the largest mutual fund in the US, as measured in terms of net
assets. I wouldn't go with the more exotic funds, like the EuroPacific
Growth or SmallCap World funds. Definitely stick with the growth
funds. You're young. You should be aggressive.

More important than fund selection is vehicle selection. If your
employer is offering a match on the 401k, definitely contribute as much
as they will match. After that, I would turn to a Roth IRA. A Roth
IRA will offer you 3 major advantages:

1) Tax-free growth (this is especially beneficial to you because you're
so young)
2) Flexibility to choose any investment, not just those on your 401k
menu
3) Flexibility to withdraw your principal without penalty (which you
should NEVER do, but when the fit hits the shan...)

--Bill

Hi,

My company is just beginning their 401k plan. I am 23 and making $50k a

year. I can stomach about 6% of my salary. Here are the options given
to me:


Growth Investments
- AMCAP Fund
- EuroPacific Growth Fund
- SMALLCAP World Funf
- The Growth Fund of America


Growth-and-income investments
- American Mutual FUnd
- Capital World Growth and Income Fund


Bond investments
- American High-income Trust
- Capital World Bond Fund
- The Bond fund of America