retirement

Transcript: 401(k) Fees

Intro: If you've got a 401(k), 403(b) or other retirement plan, you probably assume that you don't pay any fees or other charges for it. But you're more than likely wrong. And those fees could be costing you big-time. Bankrate.com explains.

Voice over 1: Stop someone in your office and ask them what it cost to participate in the company retirement plan. They'll probably say this:

MOS: "Nothing. I don't have to pay anything as far as I'm concerned."

Voice over 2: But that's not true. If you're one of the 40 million Americans with a 401(k) plan, and you invest in mutual funds, you probably pay fees for the privilege. You just don't know it.

Voice over 3: The fees you pay are probably in here ... the prospectus that describes what the fund you invest in does, the types of investments it makes, and the cost for doing it. And these expenses range all over the place. ... from a quarter of a percent a year to 3 percent or more. You don't see them because they're coming out of your earnings.

Voice over 4: What's a percent or two? A new Mercedes ... at least. Say you put aside 5,000 a year for 30 years and earn 6 percent on it. You'll end up with just under $420,000. But if you could earn 7.5, you'd save $555,000. That extra 1.5 percent in fees cost you $135,000.

Voice Over 5: Why would your employer offer you funds that charge 2 percent when they could find ones that charge a half percent? Probably because they're like you ... they're simply not reading the fine print.

Standup: The smaller your company or your plan, the higher the probability you're going to find big fees. The only way you're going to know, though, is to either ask or read your fund information. And if you don't like what you see, say so. For Bankrate.com, I'm Kristin Arnold.

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