For an audio version of this post, please click on the speaker icon (top left).

 

When I first joined my current multi-specialty group practice in March 2006, I was assigned to the Pension Committee (as well as the Ancillary Committee).

At the age of 34, to show you how financially naive I was at the time, I remarked to my radiology partner that I could not believe that I got placed on the Pension Committee, especially when I anticipated it would be 3 decades before I retired.

My radiology partner at the time simply replied that that is exactly why I needed to be on it.

So somewhat begrudgingly I accepted my position, eventually taking on the title of a Trustee of the Pension Committee.

Because of my very basic financial knowledge at that point of my life, I mainly deferred to the other committee members who were more senior than me.

We did have an independent financial advisor that we would meet quarterly with, go over various market trends, and see if any mutual funds that were in our 401k were up for deletion or placed on a watch list.

This went on for several years: my attending meetings, where I would start to pick up some financial tidbits, and then going along with the majority who pretty much followed what the financial advisor suggested.

My financial awakening.

As mentioned in previous posts, after my divorce was finalized I found myself in a huge financial pit of debt (negative $850k net worth was the lowest I was able to official document, but it could have been even lower).

I did my best to try and rise from the ashes like a financial phoenix, and armed myself with financial knowledge for the first time ever in my life.

Blogs like the White Coat Investor as well as forum postings by the Bogleheads helped to open my eyes and introduce me to topics I really had no idea about.

It was through these resources that the concept of index fund investing first entered my mind.

The more I read about index funds the more I realized that this was a perfect vehicle for not only my future investments but for pretty much the vast majority of investors out there.

Pleading my case.

Until this point in time, the 401k that was offered at my work only had actively managed funds

Armed with my newly found knowledge on index fund investing I made it my mission to have some index fund investing options implemented.

I ended up creating a Power Point presentation that I formally presented in front of the rest of the committee members at our quarterly meeting (September 2015).

[embeddoc url=”https://xrayvsn.com/wp-content/uploads/2022/02/Pension-Committee-3.ppt” viewer=”microsoft”]

 

The presentation went over well and at the end of it we voted on the motion to add index funds to our 401k plan.

I was thrilled when the motion unanimously passed.

I feel that adding the index funds was a big hit as many employees have indeed taken advantage of these low cost funds.

It certainly made me feel great knowing that, by playing an instrumental in the implementation of these index funds, I truly was upholding my fiduciary duty as a trustee of the Pension Committee.

Takeaway.

If you are just starting out and retirement feels too far in the distance, do not have the attitude I originally had and dismiss addressing it from the beginning.

It is the changes you make at the beginning of your career, not the end, that will have the greatest impact on retirement.

Although it certainly helped that I had a major voice in the implementation of index funds in my 401k plan because I was on the Pension Committee, requesting a change in fund offering can be made by anyone.

It seems that employees are getting financially savvy with their retirement accounts, recognizing the low expense ratio benefits of index funds, and even going as far as suing their workplace if the 401k plan did not include index funds.

I also want to draw attention to a particular detail that was included in my Power Point presentation, the revenue sharing that some mutual funds have in place that makes you think that your expense ratio is a lot lower than it really is.

Prior to the Vanguard index funds addition to my 401k, I had the bulk of my investment in the Columbia Large Cap Index, with an expense ratio of 0.20

The Columbia funds offered a revenue share to offset this cost of 10 basis points (0.10).

I originally, and incorrectly, assumed that this offset would make my expense ratio lower to 0.10 (which would bring it closer to the Vanguard Index funds expense ratio of 0.05).

However I later found out, much to my chagrin, that this offset did not go directly to me.

Rather the offset went to to reduce the 401k plan fee for EVERYONE.

Thus this offset would have a negligible reduction in my individual expense ratio for that particular mutual fund.

Because of IRS limitations regarding how much you can put into retirement accounts each year, every dollar I have in there is extremely valuable.

I certainly did not want these valuable retirement dollars being used to lower the expense for everyone in the plan if I could help it.

 

 

Note:

If you are in search of financial help, please consider enlisting the service of any of the sponsors of this blog who I feel are part of the “good guys and gals of finance.”

Even a steadfast DIY’er can sometimes gain benefit from the occasional professional input.

 

 

-Xrayvsn