401k Fees Killing Your Retirement?
401k fees were the subject of a 60 Minutes investigation in April 2009. I believe it’s time to revisit this subject again. Over several years, we’ve been dutifully saving for retirement via a 401k plan through our employer. Our hope is that our 401k will earn enough to pay for retirement. Right? However, I don’t think it’s OUR retirement that plan administrators are planning. If you get my drift. Please note: I’m not suggesting that ALL 401k plans are evil. I am suggesting that you be aware of all aspects of your retirement plan.
YouTube: 60 Minutes 401k Fee Issue 2:32mins
Note: To view the entire 60 Minutes piece click here
Buyer Beware!
Are you aware that you could be ‘nickle and dimed to death’ by fees? The 60 Minutes Report suggests some fund fees “could eat up as much as half of the income in some 401k plans over a 30 year span”. Let me put it another way. Fees can steal 50% of your retirement income over 30 years. Is that the case 100% of the time? Of course not. Of course we understand that there are necessary fees. However, do you really know where your returns are going? If not you, then who? Even with new legislation and new SEC guidelines regarding fees, the water surrounding 401k plan and Mutual Fund fees is very muddy. To top it off, the 401k industry and powerful lobbies are pressing for exemptions from the new disclosure rules. There is a good article in the Wall Street Journal regarding the new rules and reforms on 401k fees (particularly the 12b-1 fees).
Fear Not!
Our biggest financial fear is running out of money during retirement. That fear is mixed with bitterness when we discover that our retirement plan actually had higher returns, but some of those returns were gobbled up by unnecessary fees. We all need a guaranteed income in retirement. A portion of our retirement money should be in a safe place where at least it has guaranteed minimum growth. As we age, we must insure larger portions of our retirement and protect it from fees and volatile markets.
Plan of action:
- Read your 401k prospectus before making contributions
- Review your 401k statements at least once per year
- Diversify your retirement plan
- Increasingly Insure larger portions of retirement as you age
“The thing that will surprise people the most will be the non-investment charges on there,” such as fees that go toward plan audits or attorneys, says Ryan Alfred, president of 401(k) data provider BrightScope Inc. Workers will need to keep a close eye on their account statements, because some service providers may bill only once a year, he says. (From WSJ Article: Shining a Light On Murky 401(k) Fees)
Question: Do you know how much of your retirement is eaten up by unnecessary fees? (comment below)
Credits: Article reference credited to: 60 Minutes- The 401k Fallout (April 12, 2009) and Eleanor Laise WSJ article- Shining a Light On Murky 401(k) Fees (Nov. 13, 2010)
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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.
