Nickel & Dimed: Hands in your 401k

soundoff (7 Responses)

1. Joel Radakovitz
   

   The laws governing 401(k) plans have become increasingly complex over the last decades. 401(k) professionals continually advise congress that serving 401(k) clients to wade through complex regulatory hoops takes time and expertise which cost money. In spite of this, competition and technology have driven 401(k) fees down 40% to 60% over the last four years. Small plans have a higher percentage of fees because of basic fixed costs but costs as a precentage drop dramatically as the plan assets increase. A small plan of less than $1M with 50 participants can be all in at 1.15% to 1.4%. A large plan of $10M with 300 participants can be all in at .55% to .95%. The low to high differences are explainable and justifiable.
   ie. Keeping long term retirement money 100% in a money market is the perfect example of why you should pay a higher fee. Bad investment advice will empty your 401(k) account much faster than an extra 1% in fees. The money market will surely lose out to inflation, it is not an appropriate investment and 100% money market is imprudent. Your plan probably offers a fixed account or a conservative balanced fund that has done 300% to 600% better than the MM fund. With good advice a properly invested 401(k) portfolio will more than offset the fund management fees and investment advisory fees which represent 70%+ of the total 401(k) plan fees.

   November 14, 2009 at 9:44 am |
2. ronvan
   

   Sadly, it is the way we have become. Those trying to make enough money to maintain their families, lifestyes, dreams and retirement. And those that are in a position to try their best to "rape you" of as much of that money as they can. They used to hang horse theives! Those countries that we are in, fighting Al Queda, etc., STILL, cut theives fingers/hands off for breaking the law, stone people to death, beat them publically. Here WE are "civilized", so when someone is caught breaking our laws we watch for years as trials, plea bargaining, mistrials, etc. take place and the "guilty/charged" continue to live the good life.

   October 31, 2009 at 9:57 am |
3. matt larussa
   

   My quarterly statement lost $100. Yet I am 100% invested in a money market fund. My 401K provider charges fees in excess of the interest they pay me. The unfairly pay low interest and charge high fees so I am paying them to keep my money in a money market account that requires no work or expertise on their part. And I have no choice since I can not witdraw the money. Congress should explore why there should be any fees at all on money market 401K accounts. Most of you dont even know this is happening in your 401K. Does anyone else feel that we need our elected representatives to protect us average workers so our retirement dollars do not simply pay corporate salaries. WE NEED401K REFORM. paltzcommons@aol.com

   October 30, 2009 at 9:47 pm |
4. Mike Alfred
   

   Doyle, you are absolutely right. Unfortunately, with pretty much every politician, dog, cat, and garbage man tied up with healthcare, it seems like America's retirement system has taken a backseat.

   PS You can get a basic idea of how much you may be paying in fees by going to http://www.brightscope.com I noticed that Gerri neglected to mention BrightScope even though it's the only resource on the web for participants to try and figure this stuff out.

   October 29, 2009 at 2:38 pm |
5. Doyle Walters
   

   One of the best kept secrets in the US today is how much plan participants and/or sponsors spend on hidden fees in their 401K plans....As Gerri Willis pointed out in her piece, Nickel and Dimed
   this morning, the costs of the investment options are relativley straigtforward and accessible to a determined inquirer. Those costs can be as much as 1% of the amount invested in that particular fund.

   However, there can be other fees that are assessed in addition to the asset managment fee, i.e., 12b-1 fees. These fees are often combined with a finder's fee, and in some cases, a fee called the SubTa fee, and are not as readily transparent. Additionally, there are fees for the Record Keeper, the Third Party Administrator and in some cases the Registered Investment Advisor. These are sometimes expressed as a fee per participant and sometimes as a percentage of the total assets in the plan.

   The financial services industry has perpetrated an egregious wrong against the American worker and their employers because the usual and customary sales practice in this area has historically been to reveal only a fration of the overall cost to the plan sponsor. That is, it is not unusal for the 401K provider, or the financial advisor selling the plan, to tell the business owner, or Chief Financial Officer, that the total cost to the company is only $4500 dollars a year, or some similar low ball number, when in fact when all the hidden fees are accounted for the actual cost could be as much as $60,000 a year, or more.

   The push in Congress today is toward full fee transparency and it is well overdue.

   October 29, 2009 at 11:11 am |