I saw your comment that Fidelity had different target date funds and in one of your blogs you listed Fidelity Freedom® Index 2040 Fund - Investor Class. My firm is switching our 401k from Vanguard to Fidelity in October and the default for me would be Fidelity Freedom® Index 2040 Fund - Institutional Premium Class. It appears to pass all the requirements but just curious what’s differences from Investor Class fund? I can select something outside the default if there are more target date fund to research.
Hey Joe,
That sounds perfect. I always check the expense ratio to make sure it’s low (around 0.1% or lower). The different “share classes” are usually just a “bulk discount”. i.e. the “Investor” class is for any Joe off the street. But if you work for a big company or hospital or university or whatever, they can buy in bulk with a higher minimum investment to get a better deal. Take a look:
- Fidelity Freedom® Index 2040 Fund - Investor Class (FBIFX)
- Expense ratio: 0.12%
- Minimum investment: $0.00
- Fidelity Freedom® Index 2040 Fund - Institutional Premium Class (FFIZX)
- Expense ratio: 0.08%
- Minimum investment: $100,000,000.00
So if you have a hundred million dollars, I’d say go for the Premium class to get the additional 0.04% discount. Otherwise, the investor class is just fine. Since you’re investing through your work account, you get to take advantage of the bulk discount. What you’re getting is even better than what I suggest on my TDIF page.
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Sounds good-thanks. I’m looking forward to the switch over to Fidelity based hearing it has better website/app features. It will move my brokerage acct over too.
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