Wednesday, December 23, 2009

401(k)s Suck

After complaining about health insurance being tied to one's job, I'd like to expand that complaint about it being tied to 401(k) plans.

Back in my Intel days, my health insurance and 401(k) accounts were basically selected by Intel. Neither of which really made me happy. Why can't *I* make such selections? Being as healthy as I am, I didn't make much use of my health insurance options. I remember Intel sending me a statement one year saying they spent something like $4,500 for my health insurance, and I laughed thinking, "Wow, they really got ripped off!" I'd have preferred them pay me that money and I'd have bought my own health insurance somewhere else.

When I first started working at Intel, I also opened up a 401(k) account because hey, that's what you do to save for retirement, right? After about a year of saving money in the account, I took a closer look at the advantages and disadvantages of them and decided to stop. Oh, I'd still save for retirement, but I decided I liked a boring old IRA better. The main reason--to disentangle myself from the mutual fund choices that Intel provided. I thought they sucked.

I had to open an account with some firm--I don't even remember what one it was anymore--and I got a sheet with a list of 20 or so mutual funds I could choose to invest in including stocks, bonds, money markets, and pure Intel stock. I think it might have been USB. I remember somehow ending up in a situation where I had a USB account with something like $10 in it. I don't even know how that happened, but I had that account for three or four years wondering why they kept wasting money telling me about ten bucks I had in my account. I finally got annoyed enough at the statements that I finally called them and got them close the account and send a check for me for ten bucks.

I put all my money in what I considered the lesser of 20 (or so) evils--an S&P 500 index fun. But why should I be limited to those options in the first place?

When I started working, I signed up to have my paycheck direct deposited in a bank account of my choosing. It's a great system! It works like this: I open a bank account wherever I want, then I tell Intel the account number so they can send my money into it. Why can't 401(k)s work like that? It's so simple. I can invest the money with any company I choose.

The one really nice thing about being laid off--besides having more time for other hobbies--is that they kick you out of the program. I was required to take my money and split, which I considered a blessing. =) I rolled it over into a traditional IRA with an institution of my choosing, and could then invest it in any choice of thousands of mutual funds and stocks.

But the system is screwed up, if you want my opinion. Intel should not be able to limit my investment options to the 20-or-so options they deemed acceptable--and if there's one investment in my book that's NOT acceptable, it's investing in your own company's stock. Just ask anyone that used to work at Enron or Lehman Brothers--but that was a prominent option. Obviously, Intel's investment choices did not have my best interests at heart. It had their own interests at heart, which is the very reason they should NOT be in control of those accounts in the first place.

Amanda has a 401(k) due to her working the corporate job and recently let me take a gander at the investment options they provide. I cringed. I did not like the options at all. Even the S&P 500 index fund had an expense ratio of 0.5%--which I consider absolutely insulting when I know there are such index funds with an expense ratio of just 0.1%. That index fund was charging five times more than it should! And it was the cheapest fund available in terms of expense ratio. Criminal!

But in her case, I suggested she should keep adding to it. Not because the funds choices are great, but because her airline has matching contributions. That's really the only thing that makes it worth while. If it weren't for the matching contributions, I'd tell her she was better off taking her retirement money elsewhere. Intel did not have matching contributions, so that issue wasn't a consideration for me.

Once Amanda retires (or is laid off--this is the airline business we're talking about here), she'll be free to roll over the 401(k) into an account of her own choosing--one with more and better options available. Until then, she's stuck with cruddy investment options.

But it ticks me off. Direct deposits into a bank account of my choice worked so well. Why is it so darned hard to do the same with 401(k) accounts? The company you work for should not be who gets to choose where to invest your money.

I had a second account I opened while working at Intel--this one in regards to the stock participation plan. Basically, it let me buy Intel stock at a discount. Normally, I'm not inclined to buy stock in the company I work for (and at the time, I felt Intel stock was wildly overpriced anyhow), but they'd let me buy the stock for a minimum of 15% below the current market price, and I could sell it immediately for a profit. It was free money! It would be stupid not to take it.

But it meant I had to open an account with E*Trade, a company I loath. I used to have a brokerage account with them. I used to have a bank account with them. And eventually I realized the errors of my ways and ditched them. Until Intel foisted them back onto me. Bastards! Can't they just deposit the stock in a brokerage account of MY choosing? Direct deposit the stock into a company I'd actually want to do business with?

This is actually fresh in my mind, because that E*Trade account still haunts me today. I haven't worked at Intel since 2001, and somehow 63 shares of Intel stock got stuck in a twilight zone. I wasn't able to sell the stock, because they didn't have "paperwork" to authorize it. I couldn't transfer the stock out of the account, because it didn't match the name on my other brokerage account. And those stupid 63 shares have been collecting dust ever since, mostly because I was too lazy to fill out paperwork to "authorize" the company to sell them. Really my own fault, in that sense, but the stock is down about 50% from that original purchase price, so it's turned into a remarkable loss for a little "free money."

Anyhow, I'm tired of them sending statements to me for the past decade, and finally decided to do whatever it took to close the account. And if, God willing, I can actually get that stock sold (*fingers crossed*), I can actually claim a capital loss on it and save some money in taxes. It'll be the first good thing this stock has ever done for me.

So I called up E*Trade this afternoon, punching in account numbers, codes, and at one point yelling into the automated talking machine, "I want to talk to a real, live talking person!" And the machine sweetly responded that it "could not understand my request." I pounded the phone a few times, then pressed pound over and over and over again to see what happened, and the automated voice suggested that if I wanted to talk to a representative, I could press one. So I pressed one, and finally got to talk to a real-live, honest-to-goodness person. "And what's your account number?" he asked. ARGH! Why the heck does their stupid machine ask me to punch in my account number if apparently their service representatives can't even see that information?!

We chatted a bit, him trying to convince me to open an E*Trade bank account, and my telling him I wanted to cut every last thing tying me to their wreck of a financial institution, and he finally transferred me to a trading specialist who, somehow, remarkably, was able to put in a sell order for those 63 shares of Intel (requiring no paperwork on my part--why the hell couldn't they do that back in 2001?!), and I should be rid of those evil shares once the market opens later this morning. The trade will cost $14 and change, and they were "kind" enough to waive the $40 fee they normally charge for doing something I wanted them to do eight years ago for not selling it online through their website. (I wanted to! *rolling eyes*) Good riddens! The money should settle after a few business days, then they'll send me a check and close the account. Finally, a light at the end of the tunnel!

By comparison, my main brokerage account currently lies in the hands of Scottrade. I can't say enough kind things about these folks. I recently called them about a week ago. I owned a few shares of Terra Industries, and they paid out a special one-time dividend of $7.50 per share, which plopped about $2,000 cash into my account. Normally, I'd just reinvest the dividends in whatever stock looked particularly attractive at the time, but I'm looking to fund my IRA and HSA accounts come January. (I've already maxed out my contributions for this year.) I wasn't entirely happy about having $2,000 in dividend income showing up for the IRS (really, they couldn't wait an extra two weeks for the new tax year so I can delay paying taxes on it for 12 months?), but at least it gives me two grand in cash to put towards these other accounts. The only catch was--I needed to get the money out.

So I called up Scottrade about a week ago. And you know what happened? Someone answered the phone, saying something like, "You've reached Scottrade. How can we help you?" No buttons to press. I told him, "I need to get some money out of my account." I told him my account number, how much money I wanted to take out (two grand), and confirmed the address on the account that the check should be sent to, and we hung up. It was a wonderful experience, and that's exactly the reason I prefer doing business with Scottrade rather than E*Trade. Nothing I've ever tried to do with E*Trade has ever been easy.

And get this--I can buy or sell a stock at Scottrade for $7. E*Trade charges twice as much, and the service there sucks!

I'm getting a little track, but my point is this: I wouldn't have had to even deal with E*Trade if it wasn't for Intel's meddling to begin with. Just deposit the stock into an account of my choosing, just like you do with my paycheck. I could have gotten better service, at better prices, and been a heck of a lot happier with the end results.

To me, jobs are where I get paychecks. My employer really should not be involved in choosing my health care, retirement options, brokerage accounts, and so forth. But everyone always goes on like this is normal, or even good. If you're a corporate drone, it may be the best option available. But it shouldn't have to be that way, and I sure wish someone would fix it.


Goofy girl said...

I'm with you on all those points! My DH has a 401 K through his work and they choose where the money goes but they do match it, which is prolly the only reason he choose it.
I'm glad you found someone you like to work with and that you got rid of the jerks!!

Dana = )

Unknown said...
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Unknown said...

Ironically, there's an E Trade ad just under your photo on this blog!