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January 17, 2008
Disclosure of 401k Fees and Expenses
Do you know all of the fees and expenses that you are paying in your 401k or 403b retirement accounts. A recent AARP study found that 83% of those surveyed had no idea how much they were paying in fees and expenses. This is compounded by the fact that many of those people didn’t even know that they were paying fees. It can also be documented that many of the fees that we are paying are excessive and, in many cases, are draining money from these retirement accounts that are becoming so critical to the financial security of retirees.
Knowing how much you are paying and choosing funds that have lower expenses with similar results can make a big difference in how much money is accumulated in these retirement accounts. Consider this example provided by AARP using some Government Accounting Office (GAO) data: if a 35 year invested $20,000 in a 401(k) plan over 30 years, paying 0.5 percent in fees, that individual would have $132,287 for retirement. But increase the fees to 1.5 percent, and the amount available for retirement is only $99, 679 – that is a 25 percent reduction in the account balance. Even if the fee only increased from 0.5 percent to 1 percent, the value of the retirement account would be reduced by $17,417, or a little over 13 percent over the 30-year period.
Finally there is legislation in congress to address this critical issue but don’t think it’s passage will be a slam dunk. If it was that easy, we would already have disclosure of these expenses. The reason that we don’t already is that the investment lobby is powerful and they are fighting to keep this from happening. The only way to counter this is to let your legislators know that you don’t just support this legislation, you demand it!
You can get more information about the legislation that is in different forms in each body of congress by googling: 401k fees disclosure legislation . You can find out who your representatives are and how to contact them at: whoismyrepresentative.com.
Please take the time to let your representatives know how you feel about this legislation. It will make a difference!
Disclosure of 401k Fees and Expenses
Do you know all of the fees and expenses that you are paying in your 401k or 403b retirement accounts. A recent AARP study found that 83% of those surveyed had no idea how much they were paying in fees and expenses. This is compounded by the fact that many of those people didn’t even know that they were paying fees. It can also be documented that many of the fees that we are paying are excessive and, in many cases, are draining money from these retirement accounts that are becoming so critical to the financial security of retirees.
Knowing how much you are paying and choosing funds that have lower expenses with similar results can make a big difference in how much money is accumulated in these retirement accounts. Consider this example provided by AARP using some Government Accounting Office (GAO) data: if a 35 year invested $20,000 in a 401(k) plan over 30 years, paying 0.5 percent in fees, that individual would have $132,287 for retirement. But increase the fees to 1.5 percent, and the amount available for retirement is only $99, 679 – that is a 25 percent reduction in the account balance. Even if the fee only increased from 0.5 percent to 1 percent, the value of the retirement account would be reduced by $17,417, or a little over 13 percent over the 30-year period.
Finally there is legislation in congress to address this critical issue but don’t think it’s passage will be a slam dunk. If it was that easy, we would already have disclosure of these expenses. The reason that we don’t already is that the investment lobby is powerful and they are fighting to keep this from happening. The only way to counter this is to let your legislators know that you don’t just support this legislation, you demand it!
You can get more information about the legislation that is in different forms in each body of congress by googling: 401k fees disclosure legislation . You can find out who your representatives are and how to contact them at: whoismyrepresentative.com.
Please take the time to let your representatives know how you feel about this legislation. It will make a difference!