Do You Understand Your 401(k) Fees?
If You Don’t, You’re Not Alone.
A study finds 56 percent of workers do not understand retirement fees.
According to a recent report from the US Government Accountability Office (GAO), Americans enrolled in 401(k)s need to brush up on the details of those plans. When you consider that 56 percent of workers are participating in 401(k)s, that’s an issue that needs to be addressed.
The GAO study found that 40 percent of 401(k) participants don’t understand the fees associated with their retirement packages, and another 41 percent had no idea they even paid fees. The GAO survey also found that 45 percent of workers who read their 401(k) plan’s disclosures still didn’t understand the associated fees. This is a big problem, because 401(k) fees—if you’re not keeping close tabs on them—can eat up your retirement nest egg. As Money points out, if your expense ratio is high, you’ll be paying a heap of fees over the long-term. For example, if your 401(k) has a .75 percent expense ratio, a $400,000 balance and you’re setting aside $400 per month, in 35 years you’ll have $816,669 saved. However, if all things are equal and your expense ratio is two percent, you’ll have just $611,747 stashed away. That’s a big difference.
If you’re curious about your 401(k) plan fees, contact your employer’s HR department. If you’d rather do the research yourself, you can use an online 401(k) fee calculator. No matter how you do it, make sure you know what you’re paying. If you’re paying too much, look into available options to lower the fees and/or consider whether it makes sense to switch to a different retirement plan.
This article was written by Chris O’Shea and originally published by SavvyMoney on September 10, 2021. It is republished with permission.
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