Your 401(k) Is NOT Free
Fees charged on 401(k) retirement accounts are so obscure that most American are under the impression that they are free!
An AARP poll published last February demonstrated that 71% of respondents believe they do not pay fees on their 401(k)’s. An additional 6% said we not sure if fees were levied.
In fact, there are two main fees associated with 401(k) plans: investment management fees and administrative fees. A study from Deloitte and the Investment Company Institute release last November reported that the median 401(k) expense ratio is 0.78% but has a wide range from 0.28% to 1.38%. These fees can be justifiable if the investment performance is good, but investors need to recognize that they are definitely paying a fee.
New rules are about to take effect that will force plan sponsors to disclose the total fees or expense ratio that investors must pay.