The latest article by Laura Rowley on the 401(k) fee flimflam involves how some 401(k) plan providers are charging exorbitant fees hidden behind a haze of complicated math and chicanery. The bottom line is that some employers are ill-equipped to properly analyze the fees of a plan provider and so sometimes make mistakes in picking one that has much higher fees that disclosed. Personally, I think the value in the article comes near the end where she explains how you can protect yourself.
Hutcheson suggests that employees ask their plan administrators or employers what the real economic cost of their 401(k) account is, the risk-and-return profile, and how participants can improve it. “The law requires the participant to know if the return is sufficient to justify the cost,” says Hutcheson.
They include a US Department of Labor article on 401(k) fees and tell you to ask about each of those fees so you have an accurate picture. If you’re being swindled, they warn that you should still contribute to get a match (don’t contribute if you don’t get a match) but then take the excess and consider putting it into a Roth. If you’ve maximized your Roth, consider a type of Traditional IRA.
2 responses to “Protecting Against High 401(k) Fees”
[…] of My Retirement Blog has some suggestions for Protecting Against High 401(k) Fees. Fees may seem small now, but they eat into your […]
Participants in 401(k) plans do not have to take this sitting down, nor does it need to be confrontational with your employer. First…figure out your expense grades on http://www.fundgrades.com. There should be no reason that your 401k, regardless of size, doesn’t have at least an honor roll grade in expense for any fund.
Next, I suggest picking up a copy of the book “Stop the 401(k) Rip-off!” by David Loeper. It actually shows you not only how to calculate your costs, but coaches you on how to approach your employer about getting the costs lowered in a positive, non-confrontational manner.