How I'm fixing the 401(k)

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.

They don&#x27;t state which Vanguard funds you&#x27;ll have access to (though they explicitly say they just use passive ones), but apparently there is an option to have the employee do a custom allocation within their menu of funds. Given the .10% expected fee for the underlying mutual funds I&#x27;m guessing they&#x27;re assuming investor class (like VTIAX), which is pretty fair!<p>A one-time, $500 setup fee, and $8&#x2F;month per employee is pretty great. The .03% custodial fee to the employee isn&#x27;t bad either.<p>Again the big hurdle for a small startup &#x2F; business is even being able to offer these (contacting Fidelity and Vanguard is sadly awful as a small person without company history or at least 20 employees). Glad to see competition in this space!

To the guideline team: I noticed you don&#x27;t have an SSL cert setup on your root domain: <a href="https:&#x2F;&#x2F;guideline.com" rel="nofollow">https:&#x2F;&#x2F;guideline.com</a>.<p>You should probably set this up and then you can have it redirect to your www subdomain.<p>I hit this page by accident when trying manually dropping your blog subdomain to visit the site.

Tangential question, but is anyone else worried that the rules of 401(k)&#x27;s can be changed at a later time. History has shown that retirement funds are highly valuable sources of money that companies and governments eventually eat away at. Pensions funds were eventually raided by companies. And social security has been used for alternate means by the government. Is there anything that prevents the government from changing the rules of 401(k) plans at a later time that allow them to be misappropriated as well?

I think this is huge. Retirement is totally full of people reaching in for nothing.<p>It started with &quot;we will manage your money with secret investments, for 2% fee and 20% if we beat a benchmark&quot;.<p>With enough math and science, people moved into index funds. Except index funds through a 401k can easily be 1%+ extra fees. This is an awesome way to avoid that.<p>The only irony, is that the founder made taskrabbit, which is part of the gig aka no retirement for you economy. Only other people who can afford task rabbit have a 401k, not the actual doers.

Congratulations on launching! I&#x27;m particularly impressed you are doing the recordkeeping in addition to advisory. I look forward to crossing paths with you someday.<p>I&#x27;m also starting a company in the 401(k) space though focusing completely on the educational aspect. While making it easier for both the employer and employee is something to strive for I believe education is a component that many overlook and is of particular importance for the less highly compensated employees who don&#x27;t contribute enough to their 401(k). &quot;Financial wellness&quot; is the industry buzzword but for me that means getting people financially prepared for all of the big life events between the day they start work and the day they retire. A participant with a budget, emergency fund, and a plan for their financial goals is going to be less stressed and more able to focus on the long-term goal of retirement.

It actually looks like Guideline is a better deal for having Vanguard funds in your 401(k) than even having Vanguard itself manage it. I can&#x27;t find Vanguard&#x27;s administration fees on their site (not a good sign), but they also got sued for overcharging in their 401(k) plan that they had setup with Anthem:<p>&quot;Plaintiffs also allege excessive fees paid to Vanguard for record-keeping services. Over the period 2010-13, the plan paid approximately $80-$94 per participant for record keeping, both through hard-dollar and revenue-sharing fees; in September 2013, the expense was lowered to a flat annual $42 fee per participant. However, the “outside limit” of a reasonable fee for the plan would have been $30, according to the complaint.&quot;<p><a href="http:&#x2F;&#x2F;www.investmentnews.com&#x2F;article&#x2F;20160105&#x2F;FREE&#x2F;160109974&#x2F;new-401-k-suit-targets-vanguard-fund-fees" rel="nofollow">http:&#x2F;&#x2F;www.investmentnews.com&#x2F;article&#x2F;20160105&#x2F;FREE&#x2F;16010997...</a>

I&#x27;ll be the first to admit that I don&#x27;t know too much about investment, but isn&#x27;t the typical advice to pretty much ONLY put your money into the Vanguard Target funds based on your year of retirement?<p>This is some relatively widespread retirement knowledge, and is frequently referenced by the likes of r&#x2F;personalfinance, r&#x2F;investing, etc.<p>How does Guideline somehow out perform Vanguard who&#x27;s been the king of this forever? Serious question.

Wow those are some razor thin margins! If you can pull this off it&#x27;s going to be both huge (from an AUM perspective) and a big win for the 1,000s of companies that want to setup 401(k) plans but are either scared off by the complexity or fee structure.<p>I do wonder if profitability can be sustained. With an average account size of $50K, you&#x27;re looking at $50K x .03% + 9 x 12 = $123 per year of revenue per participant. I&#x27;m sure there&#x27;s a scale factor to dilute the common expenses on your end, but a few hours of customer service (per participant) will eat through all of that.<p>Either way, best of luck, this looks awesome!

Tangential question: why are 401ks employer-managed at all? Why can&#x27;t they work like IRAs? That is, I create a Vanguard account, put money in it, take a deduction at the end of the year? If there&#x27;s an employer match, give your company the account number to do a direct deposit.<p>Or better yet, combine IRAs and 401ks and just let everyone deduct up to $20k (or something else that&#x27;s appropriate) to put into a retirement account you can&#x27;t access till you&#x27;re 59.5?

I&#x27;d love to come up with a genuinely transformative retirement savings system for the European market too. I built pensions systems in Ireland and the UK for years and my assessment was that the system was completely crazy from a contributors point of view - at least since DC (defined contribution) became the main paradigm.<p>Previously when DB (defined benefit) was a thing it was crazy from a company&#x27;s point of view.<p>And always the extraordinary fees concealed in labyrinthine complexity and regulation.

OctaveWealth [1] YCS12 is also a full stack flat fee 401k. We provide a very flexible investment menu, with our own Octave Target Risk ETF Portfolios, in addition to Vanguard Mutuals, and fully custom. The Octave portfolios are built inhouse using best of breed Exchange Traded Funds from multiple providers.<p>[1] <a href="http:&#x2F;&#x2F;octavewealth.com" rel="nofollow">http:&#x2F;&#x2F;octavewealth.com</a>

Excellent! Even betterment, the only robo-investor I see with a 401(k) offering seems to charge 60basis points instead of a monthly fee. Best of luck fixing the retirement world!

This is pretty awesome. If only there was a way to convince my employer this is the right thing to do. I am around 2% between expense ratio and management fees. Kind of a drag to know something like this is available and not being used...

I am all for improvement in the space, but is this actually an improvement? The premise is to remove wrappers and other fee add-ons, but the product itself is a wrapper for third-party investment funds, which raises the cost of managing a 401k.<p>Vanguard can manage your company&#x27;s 401k directly at a lower cost: <a href="https:&#x2F;&#x2F;investor.vanguard.com&#x2F;what-we-offer&#x2F;small-business&#x2F;overview" rel="nofollow">https:&#x2F;&#x2F;investor.vanguard.com&#x2F;what-we-offer&#x2F;small-business&#x2F;o...</a><p>Perhaps I am misunderstanding...

Finance PhD here who also administers and custodies my own 401k plan. 1. Treasuries have 6% volatility, stock market has 18% so your optimal modern portfolio theory portfolio should have 3 times treasuries and 1 times stock. 2. This will give you annualized volatility of around 9%. If you want the 18% volatility that the stock market offers you need to leverage 2x (your portfolio is mostly treasuries). 3. You can use treasury futures to leverage, you make money every 3 months on the roll. There is free roll analysis that gives you the leverage costs on CME website. 4. Your 401k plan is just a 70 page pdf file that you sign. The small business CEO should be the custodian and the fiduciary and just a. sign the 401k pdf trust document. b. open vanguard account on the trust name. c. keep an excel sheet of everyones contributions or have vanguard create sub accounts. 5. Its incredibly risky having a 0.03% custodian. DAO and bitcoin come to mind. Whats the fiduciary bond amount that Guideline has? Max €500k so if someone hacks their vanguard omnibus account and wires the money out they are done.

The problem with retirement is not the fees. It is that the whole structure is inappropriate for a single person who can live between 0 and 40 years after retirement. Either you need way too much or you will run the risk of running short. A traditional benefit like a pension is way more appropriate as there less variability in the large population.

I&#x27;m glad to see a startup working to minimize fees in a 401(k) plan. I&#x27;m a bit confused by what I see on <a href="https:&#x2F;&#x2F;www.guideline.com&#x2F;pricing" rel="nofollow">https:&#x2F;&#x2F;www.guideline.com&#x2F;pricing</a>, though.<p>How can you claim &quot;No AUM Fees&quot; if participants still pay 0.13%? Also, do participants pay the 0.03% fee monthly, annually, or something else? What about the 0.10% fee?

What&#x27;s with charging a custodian fee to the employee? I&#x27;ve worked at multiple employers that don&#x27;t do that.

What is the advantage of having a 401(k) instead of a SEP-IRA? My company has stayed small and we are all happy with our SEP-IRA. Our employer contribution seems to be larger than that allowed by a 401(k). I really don&#x27;t understand why a small company would want a 401(k) over a SEP-IRA.

I wouldn&#x27;t care about 401(k) fees if they provided a bigger return. The problem is that they don&#x27;t. At all. None of those managed plans provide a bigger return over a long time horizon than a three-headed fund (50% index, 25% bonds, 25% international indices).

Can I get a 401(k) as an individual, or is this still only for employers?

What about <a href="https:&#x2F;&#x2F;octavewealth.com&#x2F;" rel="nofollow">https:&#x2F;&#x2F;octavewealth.com&#x2F;</a>? They seem like a better option.

Any info on what funds do they offer?<p>The site is completely void of any useful information, and I find it very hard to believe that they can offer good funds with costs lower than Vanguard, when this is such a scale-sensitive industry.<p>[Edit]<p>$8&#x2F;month = $56&#x2F;year, divided by Vanguard&#x27;s 0.0018 equals $31k.<p>So if the employee has in his 401k:<p>- $20k, the equivalent fee is 0.41%<p>- $50k, the equivalent fee is 0.24%<p>- $120k, the equivalent fee is 0.18%<p>- $200k, the equivalent fee is 0.16%<p>- $1M, the equivalent fee is 0.136%

The problem with disintermediating is that it means you can&#x27;t make any money either. Looking forward to the blog article when some blockchain community is undercutting your 0.13%