Bloomberg TV aired a three part series on 6/19/2008 about “The Truth Behind Hidden Fees in 401k Plans.”
8 out of 10 people are completely unaware of the costs for their 401k fees according to a survey conducted in 2007. These fees are so confusing to read they may as well be in a foreign language because when they are mentioned they are buried in fine print.
As many a 17 different kinds of fees, according to the U.S.Department of Labor, can be charged to your account by plan managers. Shelf Space fees, Soft Dollars, 12b-1 fees, Finder fees, Surrender Charges, Wrap fees, and Revenue Sharing are fees that you may not have heard of, charged to your account.
These are just a few of the many terms used to levy fees against 401k retirement plans for brokerage or management costs. What you don’t know can hurt you.!
Over the years, the money saved in a 401k account should compound to make a comfortable nest egg. Most of us don’t realize how much of this equity is offset by management or brokerage fees. Ted Benna of Malvern Benefits Corporation says “401k fees at 2% over a period of time, can erode as much as half of a persons savings.
Fees as high as 3%-5% can “kill a retirement nest egg!” Edward Siedel of SEC Investment Management Division has seen them and says excessive fees have become epidemic.
More and more Americans will have to work in their Golden Years to make ends meet if 401k balances don’t start climbing higher. As he so eloquently put it “pension plans are going the way of the 8 track tape.”
With about 3 trillion dollars in 401k investment plans, Americans should take notice and ask questions. Burton G. Malkiel PhD of Princeton University tells us that financial institutions and insurance companies aren’t obligated to disclose management fees and often when they do, it’s done in such an obscure way that it is very difficult to understand.
People should be aware of the fact that 401k fees can make the difference between eating cat food or cordon blue in their retirement years. Unless laws governing disclosure rates change in the near future, there is not much you can do except ask questions.
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Don’t put all your nest eggs in one basket! Ask your broker questions about your 401k management fees. Having a 401k retirement account with social security and a small business should help you offset receding assets in what should be your “Golden Years.
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