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Integrated Wealth Management

The True Color of your 401K Fees

We have always warned people of the hidden charges that can erode one’s comfortable retirement.  Mutual fund returns in 401k plans are reported as net returns after subtracting management fees but other costs, such as administrative and record-keeping fees, are often divvied up among plan participants and are not explicitly listed on the individual statements.  This lack of transparency is what prompted the US Department of Labor to release the new 401k fee disclosure requirement.

New Requirement

As of July 1, 2012 all 401k service providers  have to disclose fees to employers.  Employers are then  required to provide this fee information to their employees by August 30th.  But plan participants will probably not know what they are really paying in fees until after November when they will receive account statements detailing what they actually paid the previous quarter, listed in dollars and cents.   For complete information on the new requirement from the US Department of Labor, go to Fact Sheet.

Three Ways to take control of your retirement

Understand the fees by visiting A Look at 401k Plan Fees.  Pay attention to the section on 401k Fees Checklist.

Utilize AARP’s 401k fee calculator to help you compare the costs to other 401k providers and see if your employer has chosen a competitive service provider.  Consider talking to your employer about adding  less expensive investment options to your plan.

Invest in a self-directed brokerage account through your company’s 401k plan if there’s such an option (be aware that you may loose a company match; check with your HR department).  If your company does not match contributions, an IRA may be a better option.  If you have left your company  or already retired, consider rolling your 401k  into an IRA rollover account.

Reminder

This new 401k disclosure requirement is a good start for all 401k account investors but whether one will truly benefit from this new regulation depends on the consequential “homework” one needs to do to make the right decision.   We have experience and expertise in this area and are more than happy to help you if you have any questions regarding your 401k account.