What would you do if you knew that $50,000 of your retirement account money was going to fees and expenses?
More than 50% of Americans are not aware of how much they pay in annual administrative fees and expenses for their 401k and individual retirement accounts. Over the course of 30 years, those fees can add up to over $50,000 of lost savings and interest.
Recent legislation from the Department of Labor has required that 401k and retirement plan providers disclose fees and expenses on client statements. While this should resolve the problem of fee transparency, nearly 40% surveyed still believe that they do not pay any 401k fees! On top of that, 20% never even look at their statements.
Here are a few tips for the DIYers:
- FeeX offers a free online site to help people discover hidden 401k fees that may be eroding their retirement savings. They also provide alternative solutions with lower fees that have a similar or better risk-reward profile.
- If you have a 401k account with a former employer, roll it over to an IRA. Look for a broker with low trading fees and funds with low expense ratios.
- Create a task or calendar appointment to check your retirement accounts on a quarterly basis. Make sure that you look at transaction details for what fees are being charged.
For the 20% surveyed who do not look at retirement accounts and avoid financial statements, there are important things that need to be done:
- portfolio allocation- does your portfolio allocation match your unique risk tolerance and what you are willing to lose when the markets are down?
- beneficiaries- when was the last time that you reviewed your account beneficiaries? Has anything changed in your life?
- fees- What are the fees being charged? Are they high and do you need to make a change?
If you don’t have the time or don’t want to manage your portfolios, ask a financial advisor for help. A one time fee of $500 is worth the $50,000 in fees saved over your lifetime.