Forbes contributor John Wasik wrote an article recently titled Is Your 401(k) Overpriced? Three Ways To Tell. In the article he compared Intel’s 401(k) plan to the similar sized plan of Accenture ($7 billion vs. $6 billion in assets respectively) using his three-step framework of:

• Compare plans of similar size
• What are the expense ratios?
• What does this cost you?

And his conclusion is that Intel employees are overpaying for their 401(k) investment options. According to his analysis “Intel’s plan costs 0.75% on average for its standalone mutual funds and 1.33% for target-date funds (TDFs)”. This compares to “0.23% on funds and .07% on TDFs” for the Accenture plan. (Side note: most of the standalone funds in the Intel plan aren’t mutual funds—see this to find out what they are.)

It total, according to Wasik, the cost savings to Accenture employees adds up to $40 million annually. He makes the point, something we have written about before (posts here and here), that employees should understand the fees they are paying and take action to minimize unrewarded expenses. We completely agree with this point.

But, rather than his recommended solution of forming an employee committee to get your employer to reduce expenses and even suing them to do so if necessary, we have a quicker and easier solution.

Not all the funds in the Intel 401(k) are high cost. You can build a very low-cost, globally diversified portfolio with the investment options available right now in the Intel plan. For example, the venerable 60% stocks and 40% bond portfolio could be built using five, low-cost funds currently in the Intel plan. These funds give you an allocation to U.S. large, mid and small-cap stocks; international developed-market stocks; emerging market stocks; and U.S. government and corporate bonds. The costs for this globally diversified allocation to more than 22,000 stocks and bonds? A meager 0.05% annually! ($50 per $100k invested)

 

So, is the Intel 401(k) overpriced? Maybe it is on average. But it doesn’t need to be overpriced for you.

 

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