Friday, March 16, 2007


Don't Let Your 401(k) Pick Your Pocket

Beware of what you don't know about your 401(k). Even though 401(k) providers are obligated to give you account statements, annual reports and plan summaries, none of them have to tell you about the fees you pay. These include "investment fees, record-keeping fees, or loan fees." The Labor Department would like to help you out, but the U.S. government doesn't get much info about these "hidden fees" either.

Fees can take a major cut out of your return on investment. According to the example at the link below, a person who puts 20,000 into a 401(k), and leaves it there for twenty years at an average annual interest rate of 7 percent, will make 17 percent less if those "hidden fees" total 1.5 percent per year rather than .5 percent. In dollar terms, that is $58,400 versus $70,000. And the more you invest, the more you lose.

The Labor Department wants to introduce new legislation that would require greater disclosure of these fees, and they may even asking the public for suggestions. Meanwhile, 401(k) plan victims - I mean, participants - have filed class action lawsuits against International Paper, Lockheed Martin and Caterpillar over the issue of these fees. Until such time as new rules on fee disclosure are passed, you can research your own 401(k) fees by consulting your benefits manager, and examining expense ratios and the prospectus of each mutual fund in which your 401(k) is invested.

"Fee, Fie, 401(k), Fum" from

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