Comments on: 401k Fees – See What You Are Really Paying

By: Abdul

Abdul — Fri, 09 Apr 2010 18:12:40 +0000

That is a great article and Brightscope is doing good work. In a 401(k) plan, your account balance will determine the amount of retirement income you will receive from the plan. While contributions to your account and the earnings on your investments will increase your retirement income, fees and expenses paid by your 401k plan may substantially reduce the growth in your account. The following example demonstrates how fees and expenses can impact your account. Assume that you are an employee with 35 years until retirement and a current 401(k) account balance of $25,000. If returns on investments in your account over the next 35 years average 7 percent and fees and expenses reduce your average returns by 0.5 percent, your account balance will grow to $227,000 at retirement, even if there are no further contributions to your account. If fees and expenses are 1.5 percent, however, your account balance will grow to only $163,000. The 1 percent difference in fees and expenses would reduce your account balance at retirement by 28 percent.

By: Mike

Mike — Tue, 26 Jan 2010 03:30:29 +0000

I like the idea of BrightScope, but the ratings consider things like employee participation rate. Not that there’s anything wrong with that, but I don’t consider that a metric of a good plan… many of the people I’ve worked with during my career just aren’t that savvy, or quite frankly, that interested in investing for retirement. Too many of them simply see it as another chunk of money taken out of their check before they get to spend it.

Still, they do have some useful and interesting information on their site.

By: Arlin Penner

Arlin Penner — Mon, 25 Jan 2010 22:52:28 +0000

Thanks for your suggestion to watch fees. However, that is not so easy to do. Your “out of sight out of mind type” is the way “no load funds and insurance products for the most part are reported. Also, the fees can be different for different services as well as different products. Often, each company tries to create a slightly different service, product, or guarantee, if available, to provide something unique to market. And certainly many different products within their own line. Thus, it might be reasonable to think that such a broad analysis of fees may not be as clear cut as stated.
I appreciate you bringing this up, however, because that is why many people trust advisors to note these matters to help them choose what fits them. Customizing what they require and desire makes those fees worthwhile.

By: Lynn

Lynn — Mon, 25 Jan 2010 17:23:18 +0000

Thanks for the reminder about BrightScope! I had checked it a while ago but I couldn’t find any information about my husbands 401K. I was pleasantly surprised to see it there now and it was rated an 82! I knew the fees were low but wasn’t sure how the investments were. I am glad to see its one of the best! Makes me want to up my % to max it out – I have been holding back not knowing if the plan was that good or not.