Want to save thousands of dollars in your retirement account?

financial independence
401k optimizer
Co-Authored and Reviewed by Gagan Sandhu, MBA - The University of Chicago Booth School of Business, CEO of Xillion
Posted on . 2 min read

Author: Gagan

💵 Change your default investment allocations to lowest cost index funds.

📣 While helping a few Xillion customers this week, I was reminded again that the big bank’s incentives aren’t really aligned with customers. The funds they offer by default are much worse than the funds that are more likely to give better returns for far cheaper fees.

🧩 This weekend, you can do your future self a huge favor by removing the high cost funds (Retirement Fund 2045 etc), with lower cost funds (FXAIX, VOO, etc) in your 401k account. As a rule of thumb, buy index funds that have:

1️⃣ Expense ratio less than 0.1%. That is, you pay less than $1 in fees for $1,000 investment in that fund in one year. Really good funds like FXAIX (Fidelity’s S&P 500 fund) have fees of 0.015%!

2️⃣ Direct investments in the companies. Good funds invest directly into companies, bonds etc. The not so good ones are house of cards that are built on top of other funds. See comments for details on this.

🎯 If your 401k plan doesn’t let you buy specific funds, you can create a brokerage account within your 401k and then buy whatever you want. If you use Fidelity, you can do this by opening a BrokerageLink account. Other platforms likely have similar offerings.

💰 $1,000 saved in your 401k today and invested into a S&P 500 fund like FXAIX or SPY or VOO is likely to grow to around $2,600 in ten years or to around $7,000 in 20 years.

🚀 Lastly, if you are on track to not max out your 401k up to $20,500 per IRS guideline for 2022, you still have 5 more paychecks to increase your contribution. 🚀

💵 BUY THESE (Low Cost Funds): FXAIX, VOO

💵 SELL THESE (High Cost & Opaque Funds - Target Retirement Date funds, in general): TRRDX, TRRKX

Join Xillion to get ideas on how to get started or to up your investing game. Explore our products & blog at Xillion - Wealth Management for Everyone!.

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