The first thing that I do when I meet with an individual company 401(k) retirement plan participant is to calculate the annual costs of their current company 401(k) retirement plan mutual funds.
In 36 years of providing investment advice, I have never met an individual investor who knew the annual cost of his or her company 401(k) retirement plan account mutual funds.
Most annual mutual fund costs are required disclosures on your company 401(k) retirement plan account provider web site and quarterly statements. But other annual costs are deeply buried where you will most likely never to take the time to look.
The two most important categories of mutual fund fees are labeled Investment Advisory Fees and Investment Management Fees.
Let’s assume that the current value of your company 401(k) retirement plan account is around $300,000. You would be lucky if all the mutual funds that you owned had annual fees and expenses of 50 basis points or lower.
That means that your $300,000 company 401(k) retirement plan account costs you around $1,500 per year. Are you getting $1,500 worth of annual investment performance from your company 401(k) retirement plan account mutual funds?
There are lower cost mutual fund options on your company 401(k) retirement plan menu. These same mutual funds have better investment performance than the mutual funds you currently own.
You are taking all the stock market risk, but not getting the investment performance rewards. Worse, you are paying full price for your lousy investment performance.
An independent, third-party registered investment advisor can fully analyze the annual costs of each company 401(k) retirement plan menu mutual fund. He or she can rank the short and long-term investment performance of those same mutual funds.
Lower costs and better investment performance help preserve and grow your company 401(k) retirement plan account. Fiduciary level company 401(k) investment makes it possible.
Ric Lager
Lager & Company, Inc.
