A complete understanding of annual company 401(k) fees and expenses is a very important part of your investment management strategy. It is one of the first things I discuss with my individual company 401(k) investment advice prospects.
My company 401(k) advice clients are completely comfortable with their annual fees and expenses. They realize that their company 401(k) retirement plan participation is not free.
Why pay annual fees and expenses for a mutual fund that underperforms the overall stock market averages?
I found a great article earlier this week in TIME Magazine that summarizes the company 401(k) retirement plan fee and expense confusion.
“Nearly half of full-time employed Baby Boomers believe they pay zero investment costs in their retirement accounts, while 19% think their fees are less than 0.5%, according to a new survey by investment firm Rebalance IRA.
Truth is, everyone who has a 401(k), or an IRA, pays fees. The average 401(k) investor has 1.5% each year deducted from his or her account for various fees. But those expenses vary widely. If you work for a large company, which can spread costs over thousands of employees, you’ll likely pay just 1% or less. Smaller 401(k) plans, those with only a few hundred employees, tend to cost more—2.5% on average and as much as 3.86%.”
Thank goodness there are some high quality company retirement plans out there. But you don’t know if you have one until you completely understand the annual fees and expenses of your options.
Don’t pay a mutual fund manager to underperform. There are cheaper and better mutual funds available to you.
Ric Lager
Lager & Company, Inc.
