TransAmerica 401k, IRA / Retirement Account Review [2024] (2024)

TransAmerica 401k, 401b, IRA review: advisory services fees, retirement account investments, changing current allocations, rebalancing, cons and pros.

TransAmerica Rating:

TransAmerica Overview

If you’re an average American like me, saving for retirement can be a huge headache. Most Americans save for their retirement through a 401(k) or 403(b) plans that is sponsored by their employer, but often administered through specialized brokerages, like TransAmerica.

Account Setup

TransAmerica makes setting up a retirement plan relatively easy. There is a user friendly web portal that features a summary of your accounts, a nifty calculator to forecast your income in retirement, and the option to quickly change your annual pre-tax contribution. There are even settings to auto-increase your level of contribution every year. This level of integration with your payroll department makes saving for retirement as simple as a click of a button, especially for those who want to “set it and forget it.”

Quarterly statements are either mailed to your address, delivered in electronic format to your email address, or posted as pdfs via the web portal.

Functionality

TransAmerica also features a mobile app that essentially provides all the same functionality, for millennials and everyone else afflicted by the modern age.

If only it were truly that easy, right? The most savvy savers among us know that there’s much more to this game then setting an annual contribution. The crux of saving for retirement is to steadily appreciate value through investing, but it is trickier than it appears, because fees often seem deceptively low, but actually significantly dampen returns and exacerbate losses.

TransAmerica 401k, 401b Investment Options

Almost all retirement savings plans allow for investment in the form of mutual funds that encompass various parts of the financial markets and with it, a wide spectrum of risks, rewards, and fees. TransAmerica offers safe choices in the form of fixed rate interest and money market funds. However, they provide relatively modest returns. A quick review of the fixed interest fund shows a return of about 2.5%, which was about a percentage point below the prime rate at the time of this review. This fund has no associated fees, which is a nice bonus, but definitely does not overcome the low returns.

There are also funds which have exposure to bonds and feature slightly better returns (about 5.0% annually, over the last 10 years). However, for my particular plan, this is limited to 2 funds, one of which had an expense ratio of 0.40%, which is personally far too high for the modest returns of a bond-based fund.

TransAmerica 401k Fees

In regards to fees, TransAmerica offerings had a wide range of expense ratios, none of which were out of the ordinary though. Vanguard funds with exposure to US equities had very reasonable (read cheap) expense ratios. The two lowest I found were 0.02% and 0.05%. However, there were also funds with expense ratios up to 1.3%. These are probably actively managed funds, but no clear explanation was given by TransAmerica. After comparing historical earnings data between the most expensive and the least expensive funds available, it was pretty obvious that they had comparable performance over a 5 or 10 year period, so TransAmerica’s array of more expensive funds was far from impressive.

Finally, TransAmerica did offer a unique set of mixed-asset funds targeted towards the expected retirement date of clients. However, the funds seemed to defy logic in a number of ways. Funds targeted towards earlier retirement dates naturally require higher returns in a shorter time period, which tends to expose them to a greater risk of unrecoverable losses. Yet, the expense ratios for all these retirement-date targeted funds was were 0.09%, which would suggest a similar mix of assets across all these funds, and little true distinction between them. TransAmerica certainly did not provide much information to resolve these lingering questions either.

In following with the theme of sparse information, TransAmerica makes it incredibly hard to find the broker’s administrative fees (separate from the expense ratio of each fund). The administrative fee is a flat $60 per year, and does not vary by choice of or number of investments. It doesn’t appear anywhere on the web portal, but does pop up in the fine print of quarterly statements. What made this more confusing was that the fee was diced up into seemingly random amounts and distributed as fees among my various investments. One other thing to keep in mind is that employers may direct TransAmerica to credit dividends and other earnings from investments towards this administrative fee, which can lower it significantly.

While the administrative fee is neither outrageous nor unexpected, its presentation is painfully unintuitive. It is also a significant cost for what is effectively automated accounting and little else, especially when you consider the value of compounding interest and the course of a 30-40 year career for the average American.

The other major fee to be aware of is the $25 loan origination fee that results from borrowing against your retirement savings. This is fairly standard among most retirement savings plans and is relatively light when compared to the fees associated with mortgages and personal loans.

Finally, to TransAmerica’s credit, there are no fees for reallocating assets. However, moving money out of one fund and into another can lead to a lock out from similar actions for a certain time period and for certain types of funds (ie. 90 days for moving in and out of Vanguard funds and vice versa). There also does not appear to be any hidden fees or expenses that are calculated into the returns of each fund. I checked this by comparing the returns of a number of funds against the returns of their underlying exposures/assets in the same time period, which did not reveal any large discrepancies.

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TransAmerica 401k Review Summary

All in all, TransAmerica seems to be a basic retirement savings plan administrator with no real surprises, but not a lot of added value either. Fund offerings came with a scant 1-page summary containing information on the assets held by each fund, historical returns data, and expense ratio, but little by way of advice or strategy.

An extensive search of the web portal revealed no true sources of research. This is perhaps telling of the minimal level of service provided by TransAmerica, which lies in stark contrast to brokerage like Charles Schwab, which also offers retirement savings products and loads of data and research to help clients make more informed decisions. Of course, many Americans are beholden to the specifics of their employer based plans, but if your employer is flexible, it may be worth considering a discount broker.

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