- Share This Post
- Pin It
- 0
-
Sparkle (0)
It's been a precipitous fall. The balance in the majority of 401(k)s keep going lower and lower and lower.Now,to add insult to injury, investors are learning that it's not just the stock market that is hurting their bottom line, it's the fees being charged by their 401(k)provider.
"The financial industry is a scam. Advisers and money managers earn more on your money than you do, " says Michael Edesess,Partner and Chief Investment Officer of Fair Advisors, and author of the 2007 book, The Big Investment Lie."The problem with 401(k)s is that in very many cases the costs are greater than the tax benefits, making them a net negative
wealth-builder."
About those costs - do you have any idea how much you are being charged in administration fees for your 401(k)?
It seems like a reasonable question. It seems like a question that most people would not know right off the top of their heads but with a little searching through paperwork, could come up with the answer. And, if that failed, certainly you could shoot off an email to your plan administrator and say, "could you send me information on the fees we're paying."
It sounds reasonable.Yet, it's a trick question.
If you can believe the experts, it is virtually impossible for anyone to figure out exactly how much they are being charged by their 401(k) administer.
That’s right. Even if you tried to do the due diligence, you still wouldn’t get the answer.That's because in every 401(k) there are hidden,or some like to call them, buried, fees. And, until the market crashed, few people seemed to be aware, care, or have much passion about finding out the answer.
Today, some people are starting to care.
Unfortunately, this laissez faire attitude has cost people a boat load of money – that ‘s money on top of the money lost from portfolios that lost around 40% of their value.
According to a report on 60 Minutes, over a thirty year period, these hidden/buried fees could eat up to half the income in a 401(k)
Because I was not sure that I heard that correctly, I re-watched the report again on . Sure enough Croft reported that these hidden fees could indeed eat up half the income over a 30 year period.
How could this possibly be? And if that is true, why hasn’t someone been screaming their head off about it?
Turns out there are some people who have been fighting mad about this issue for a long time, but it never has gotten much traction.That could be changing.
Nothing like having people watch their life savings disappear to get their attention that they could be paying an arm and a leg to have a 401 (k) provider administer their plan.
The bigger question is how did we get ourselves into a situation where businesses agree to do business with 401(k) providers without really understanding what it is going to cost the company, and what it's going to cost individual participants?
Jeff Acheson QPFC, Manager Director of Schneider Downs Wealth Management Advisors in Columbus, Ohio,says the problem is apathy on the part of employers. “ If no one is complaining, the employer has been happy doing nothing. “
Acheson,who says his firm does provide complete transparency on fees for administering 401(k) plans, says in the past when he tried to use transparency as a selling point, it fell on flat . “Many plan administrators saw a certain degree of security going with the big guys. Their thinking was, you can’t go wrong if you have a major financial institution administering your plan.”
Susan Howe,who is an Executive Director at Ernst &Young and part of the AIPCA Commission for financial literacy that runs the 360 Degrees of Financial Literacy website says most participants don’t do the correct amount of due diligence because they assume the company has done that for them.
“Unfortunately, a lot of people are in the mode if this is a program being offered by employer then there was some due diligence that has gone with this, ” said Howe who explained despite being in the financial industry,this whole issue of exorbitant fees on 401(K)s was something she was not aware of until watching the 60 minutes report.
Of course people’s willingness to trust financial institutions is undergoing a seismic shift.
It’s not as if ,some people haven’t been reporting about this fee scam for a
