Beware of Hidden Fees in your 401(k)

Hidden fees do occur in your 401(k) savings particularly if you are like most who invest the bulk of your savings into mutual funds. 

Natasha Gural wrote in the March 2011 Better Investing Magazine a great article on how "Hidden Fees Are Eroding Your 401(k) Savings."  She reviews how surprised investors are at how much you ARE paying for your retirement.  Hidden fees include turnover related ratio costs as portfolio managers turnover assets through trading.  Other costs include administrative, marketing and management fees.  Granted, mutual funds are for-profit businesses and render fees to maintain a profitable P & L statement. 

When you just invest your hard-earned dollars and assume that your investment is taken care of, it is wise to revisit your lack of time and interest concerning saving for your retirement.  The SEC oversees certain regulations, but it is the Financial Industry Regulatory Authority (FINRA) that imposes limits on mutual fund fees.  The SEC does provide a mutual fund calculator on their web site page to help investors (yes, that includes you if you contribute to a 401(k) plan) determine mutual fund fees and expenses. 

There are some mutual fund companies that are aware of these costs to individuals.  Vanguard is one example where they advertise that they help investors build wealth at-cost investments.   

Amy Buttell of the National Association of Investors Corporation (NAIC) reviews several of their members top mutual fund picks. 

If you work for a major corporation, it is good to check with their human resources department because employers negotiate certain packages and must report to the Department of Labor the expenses of employee benefit plans in Form 5500 (these are available to the public).  In July 2011, new rules and regulations go into effect regarding managers and advisors overseeing 401(k) plans according to a Reuter's online article.  Simply put, advisors must provide written compensation plans to sponsors.  Already, critics claim that this is still too broad in a Bloomberg article released March 1, 2011.  "Our concern is that the rule is broadly written,” Ken Bentsen, executive vice president for public policy and advocacy at the Securities Industry and Financial Markets Association, said at the hearing.

For military personnel and their families, FINR sponsors the Save & Invest FINR military home page and offers financial resources to military personnel.  It's a start to educate yourself regarding your retirement.  There are ideas to invest your disability for those military personnel seeking information. 

Of course, I am an advocate for investing in individual stocks because if you invest and hold long term, you will not pay out a lot in mutual fund fees and expenses.  The trade-off is if you are interested in monitoring your retirement investment or turning the keys over to someone else to drive the account.  Either way, the payoff comes as a result of your decision.  Blaming a manager or a fund for poor returns shows a lack of responsibility on your part if you have not researched and monitored it.  There are many professionals in the finance and investment management industry that are well-worth the fee and time to assist you with your personal finances.  Buyer beware is a catch-phrase to keep in mind as you align yourself with someone who has your best interests at heart (not their hidden agenda or fee).

1. It is important to save for your retirement. 
2. It is important to understand what are the fees and costs involved with your 401(k) and/or retirement account. 
3. It is important that you review your account quarterly if not monthly. 

Hidden fees add up over time, and if you are not properly monitoring your retirement investment, you could have less of a retirement nest egg than what could have been. 


 Disclaimer:  This article is the opinion of the person writing it, and any financial decisions made as a result does not make the writer liable for any action taken.  Please consult your personal financial advisor for more information.