401k contributions

[Misspag]

My company uses Voya for managing 401k contributions and investments. I don't like this company because they can't answer any questions regarding investments or even the products you can invest in. I have only been contributing 3% of my wages into the account because I have been getting a better return on my money in stocks through Fidelity. Is there another way I can contribute pre-tax dollars to an account that does not go through VOYA?

[FranklinF]

It appears Misspag, that I should be consulting you about investing.
🙂

On a serious note, I congratulate you on your ability to obtain a better return for your investments otherwise. If you truly have the discipline and you are confident in your skills, you may consider establishing a SELF-DIRECTED IRA and rolling over a designated amount of your 401 K plan into it.  There are STRICT RULES of owning and operating a SELF-DIRECTED IRA but , as I stated earlier, this arrangement is for taxpayers confident enough to manage their retirement income and get better returns than conventional Financial Institutions.

Self-Directed IRA (SDIRA): Rules, Investments, and FAQs 

** Say "Thanks" by clicking the thumb icon in a post
** Mark the post that answers your question by clicking on "Mark as Best Answer"

[Misspag]

Hi Franklin,

Thank you for your reply. How can I find out what the "strict rules" are? Is a self-directed IRA different from the Rollover IRA that I opened when I left my last job?

Thanks,

Suzanne

[FranklinF]

SELF DIRECTED IRA's are managed and operated by the taxpayer through a custodian (Financial Institution)

Below is a link that introduces you into the concept of SELD-DIRECTED IRA's:
Self-Directed IRA (SDIRA): Rules, Investments, and FAQs 

Below is a link about prohibited transactions related to retirement income:
Retirement Topics - Prohibited Transactions 

In addition, the custodian Financial Institution may have some restrictions of their own.


** Say "Thanks" by clicking the thumb icon in a post
** Mark the post that answers your question by clicking on "Mark as Best Answer"

[Opus 17]

---

@Misspag wrote:

Hi Franklin,

Thank you for your reply. How can I find out what the "strict rules" are? Is a self-directed IRA different from the Rollover IRA that I opened when I left my last job?

Thanks,

Suzanne

---

I think the answer was over-complicated.

Unfortunately, if your employer chooses plan X, there is nothing you can as far as investing pre-tax salary outside of plan X.  Your options (to get any tax advantage over a regular broker account) are to open a traditional IRA and make tax-deductible contributions, open a Roth IRA and make non-deductible contributions, or open a traditional IRA and make non-deductible contributions and then do a back-door conversion.

The main problem with IRAs is your contribution limits are much lower than a 401k, if you can afford to invest that much, so once you max out your IRA, you may want to go back to Voya since you may not be including the value of the tax savings in your investment return comparison.  Voya appears to offer a lot of fund choices, although they are captive funds.  What are you invested in with them?

https://individuals.voya.com/defined-contribution/defined-contribution-investment-options

Since you are covered by a retirement plan at work, your ability to deduct an IRA contribution is limited by your income.

https://www.irs.gov/retirement-plans/ira-deduction-limits

Your ability to contribute to a Roth IRA is also limited by income, but the limits are higher.

https://www.irs.gov/retirement-plans/roth-iras

You can open an IRA or Roth IRA at any bank or broker that offers them (including Fidelity, where you already have an account).  They should allow you to invest in almost anything that is traded on a public market.  Usually you will find a suite of "standard" options that the bank or broker prefers, but you can almost always find a self-directed option, where you tell Fidelity or whoever, that you want to invest in something from the stock market that is not part of their "standard" list of options.  This is not what @FranklinF  meant.

What Franklin is talking about is a true self-directed IRA, where you can invest in anything you want and call it an IRA.  You can buy gold and hide it under your bed and call it your IRA.  You can invest in the corner bodega, or your best friend's bowling alley, or you can buy vacant land hoping to sell it to a developer, and call it part of your IRA.  This is much more complicated, and dangerous, than going through a "normal" bank or broker firm.

If you are mainly just unhappy that Voya doesn't offer the investments you want, and you just want to invest in a broader selection of publicly traded securities (but nothing weird), then all you need to do is shop around for a bank or broker that offers more flexibility in their IRA plans.  As long as your income allows you to make contributions.

[Misspag]

Thank you, Opus 17,

I'm currently investing 50% into 0829 Voya US Stock Index Portfolio - Institutional Class and 50% into 0487 American Funds The Growth Fund of America -Class R-3. Is there another fund that you would recommend instead?

Thanks,

misspag

[Opus 17]

---

@Misspag wrote:

Thank you, Opus 17,

I'm currently investing 50% into 0829 Voya US Stock Index Portfolio - Institutional Class and 50% into 0487 American Funds The Growth Fund of America -Class R-3. Is there another fund that you would recommend instead?

Thanks,

misspag

---

I don't know anything about Voya funds, and I don't give investment advice.  But you started out saying you "can't get any information" which is not quite true.  You can look up funds at Morningstar, here is the first one.

https://www.morningstar.com/funds/XNAS/INGIX/quote

You can review performance, risk, strategy, and holdings.  It seems to be a fairly solid if not spectacular large cap growth fund, with a low expense ratio (the institutional class seems to have an expense ratio of 0.27% which is quite good.  Higher expense ratios are like a hidden tax.  If you were in the A class, with a ratio of 0.80%, you would earn $100 less per year on a $10,000 investment than someone in the I class.)  

The other fund is very similar, although the expenses are a bit higher.

If I had any suggestions to make, it would be that both funds are large cap growth funds, so they have the same broad strategy and a similar mix of holdings.  You might consider investing in a fund with a different strategy, like income, or small cap (small cap stocks are more risky than large cap stocks but sometimes perform better).

I think you probably have a decent mix of mutual funds to choose from at Voya, even if you can't invest in individual stocks, and you can use Morningstar and other sites like Yahoo Finance to look up and review the performance of each specific fund option you have.