Is Your 401(k) Plan Taking Advantage of You?
If you are like a typical 401(k) account holder, you are probably not sure about the level of management fees that are being deducted from your 401(k) account each year. The main reason for this is not because you are uneducated or do not care about your returns, it is mainly due to the lack of transparency in the quarterly/annual reports that you receive from your plan. A recent AARP survey of 800 workers with 401(k)s revealed that 70% of the responders believed that they were not being charged anything. In reality, the average management fees charged annually to the owner’s account is 0.83% of their invested assets. This annual rate can actually get as high as 3% in smaller plans.
Fortunately a new rule was issued by the Labor Department requiring 401(k) providers to more openly disclose their charges to the account owners. By August 30th of this year, every 401(k) owner should have received a notice with details into the amount of fees that are being charged by their providers. This notice will likely be an eye opener to many individuals given the results from the AARP survey. As painful as it may be for many, it should at least make 401(k) owners more aware of their retirement plan and will likely prompt some to shop around for a more beneficial plan/option. Before taking any actions on your own, be sure to speak to a trusted licensed professional for guidance.
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