Is Your 401(k) Ripping You Off?
From Scott Cendrowski at Fortune:
Thanks to a new rule issued by the Labor Department, later this summer investors will begin receiving reports that for the first time detail all the fees they are being charged by their 401(k) plan providers. Every investor must receive an initial report by Aug. 30. It’s a landmark moment that should go a long way toward maximizing the nest eggs of regular savers.
The disclosures will offer 401(k) investors, who collectively control more than $3 trillion, the chance to see what until now has been buried in “additional statements” or 200-page government filings. The simple fact is, many 401(k) plans are much too expensive. The average investor is charged 0.83% of assets annually. (In small plans it’s often much more, as high as 3%; in large plans, a little less.) Some plans tack on additional “wrap fees” of up to 1% of your assets. Then there are the mutual funds inside the 401(k)s. Many plans only offer funds that charge fees of 1.5% or more — far higher than the 0.77% median fee for stock funds. Consider this jarring figure: An ordinary American household with two working adults will cough up almost $155,000 in 401(k) fees over a lifetime, according to the think tank Demos. Says Edward Siedle, a former SEC lawyer who now runs a pension and 401(k) research firm: “401(k)s are leaking money like a sieve.”