Someone is Stealing from Your 401k!

Do you know that right now, someone is stealing from your 401k? And you are letting them!

Cost control is an important concept for safe investing. But when it comes to your 401k, a majority of the fees and expenses are hidden; not “in your face” so to speak.

Your 401k probably doesn’t have a huge billboard advertising commissions (like a discount broker), and you won’t get a statement of how much you pay in fees every month (like a credit card statement).

Just like your personal expenses have a HUGE impact on your personal finances, hidden fees and transaction costs can make or break your ability to invest profitably over a long period of time.

As reported by Penelope Wang from CNN Money:

“As the GAO has reported, a plan charging 1.5% annually is likely to return 17% less over 20 years than a plan that costs just 0.5% — a difference that can amount to a $100,000 or more for a typical retiree.”

So what can you do? How do you find out more about those hidden 401k fees?

You might find something digging though your 401k provider’s website. But since I’m also here to save you time, that doesn’t seem like a good choice.

Wang goes on to discuss a start-up called BrightScope. This company offers a free report that grades the 401k plans of many companies on things such as expenses and fees. Using the site is pretty straightforward, and I’ve always found it interesting to see how I compare with other companies.

But the real question is: what can you do if your plan has high expenses?

You could petition your company to switch to a new provider with lower fees. But I’m guessing that creating extra work for the HR department won’t go over well.

The path of least resistance is to move your money to a low-cost retirement investment account.

Moving your money around has some risk, because if you don’t do it correctly, you could end up with a large tax bill next year! So be sure to check with your tax consultant or accountant beforehand.

Sources:


Finally! Your hidden 401(k) fees revealed
Penelope Wang – CNN Money
http://moremoney.blogs.money.cnn.com/2010/01/19/finally-your-hidden-401k-fees-revealed/

Discount Brokers
Invest-Safely.com
http://www.invest-safely.com/discount-broker.html

Retirement Investment Account
Invest-Safely.com
http://www.invest-safely.com/retirement-investment.html

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