Decoding your 401(k) fees
What to make of all this? At first glance, maybe not much, says Dan Weeks, of BrightScope.com, which rates 401(k) plans. Webmaster tools keywords “The numbers look like another line on your prospectus—more of the same, boring stuff you never looked at.” Do a bit of homework, however, and you might discover that your employer is paying more than comparable plans are paying for the same services or that the fees for your investments are much higher than those for other investments with better returns. Webmaster tools logo Here’s how to piece it all together. Webmaster tools google analytics Getting the big picture
When pensions ruled the land, employees could leave investment costs and choices to the plan fiduciary. Google free webmaster tools But as 401(k)s supplanted pensions, employees were expected to call the shots themselves. Tools for webmasters It wasn’t clear that they had the tools to make the right decisions, says Bradford Campbell, the former assistant secretary of labor who proposed the original disclosure regulations. Webmaster tools submit Disclosure “isn’t just about fees,” he says.
Outils webmaster “It’s also about giving a useful and precise summary of investment options, so in one place you have all the information you need.”
For all that, plan expenses do add up. Blogger webmaster tools Administrative fees cover services required to run the plan, including setting up and maintaining accounts, mailing statements, and providing phone and online support. Webmaster tools with your google account Investment expenses include the costs of managing portfolios and paying brokers’ commissions and marketing costs. How does webmaster tools work Transaction fees are charged to participants for individual services. Oogle webmaster tools Some plans deduct a percentage of earnings from investments to cover administrative expenses; with others, the employer covers administrative costs or charges each participant a dollar amount.
Many employers have used the August statement (which gives an overview of plan investments and costs) to deliver user-friendly advice on retirement strategies. Add webmaster tools At a minimum, the statement must describe how the plan works and the types of expenses that may be deducted from the accounts. What are webmaster tools It must also include a chart listing all the plan investment options, a history of their performance, and benchmarks to help you gauge their record, along with the operating expenses for each investment.
Part of the issue may be the sheer volume of disclosures. Webmaster tools firefox You may have to wade through seven or eight pages to get all the pertinent information. Webmaster tools redirect In addition, plan participants don’t have much leverage when it comes to 401(k) plan design. Webmaster tools submit to index After all, you’re not going to quit your job because you don’t like the investment choices or the fees involved. Webmaster tools home page click verify this site That said, you can certainly look into rejiggering your investment allocation or raise questions with your human resources department.
Depending on the other features of the plan, you could conclude you’re getting a good deal after all, says Miller. Webmaster tools home page dashboard “If you have a very rich employer match or a profit-sharing contribution in your 401(k), it may be worth it to pay additional fees or expenses.”
Regardless of what you do or don’t do, “the biggest benefit of disclosure is that participants will start to understand their fees and evaluate where they are in their retirement strategy,” says Miller. Webmaster tools crawl errors If you end up saving more, all the better, he says. Webmaster tools search queries no data available “It’s a great opportunity to look not only at what investments you’ve elected, but also at what your retirement goals are.” What’s behind the fees
Unless you work for a big company with enough money to hire in-house 401(k) experts, your employer probably outsources some or all of the chores involved in running a 401(k). Google analytics vs google webmaster tools Those chores include maintaining records, providing customer service, managing investments and ensuring that the plan complies with federal regulations.
Some companies hand the whole ball of wax over to one service provider and let it divvy up the assignments. Webmaster tools api Others hire separate providers. Webmaster tools com Either way, the hired guns who help manage your 401(k) charge for their services. Webmaster tools links to your site (You didn’t think they did it for free, did you?)
Your employer has the fiduciary responsibility to ensure that such fees are reasonable. Webmaster tools data But until last July, that was easier said than done, given the myriad ways in which fees are handled. Webmaster tools code For instance, your employer might pay one provider a single amount to cover all the administrative services, making it hard to tease out separate fees. Free forex webmaster tools Or the fee for record keeping might be deducted from investment returns as part of investment operating costs and paid directly to the record keeper, in an arrangement known as revenue sharing.
Result? Employers didn’t always know how the fees broke out or whose pocket they were coming out of, much less whether they were reasonable. Install webmaster tools One of the goals of fee disclosure is “making service providers more transparent about fees and expenses and how they are getting paid,” says Bradford Campbell, a former assistant secretary of labor and former head of the Employee Benefits Security Administration.
For employers, that eye-opener came in July, when all plan providers had to tell plan sponsors how much money they were making. Webmaster tools in google analytics “The plan’s fiduciary always had the duty to gather information and make good decisions,” says Campbell. Google webmaster tools free download “Now there is a corresponding duty on the part of providers to disclose.”
This article first appeared in Kiplinger’s Personal Finance magazine. Webmaster tools help center For more help with your personal finances and investments, please subscribe to the magazine. Webmaster tools guidelines It might be the best investment you ever make.