Intro: Americans are sick and tired of fees. And it's not just big banks who are taking a bite out of people's hard-earned money. Fees could be eating away at your 401(k) and you don't even know it. In fact, high fees can turn your nest egg into scrambled eggs.
TAKE VO: For people saving for retirement, the most exciting thing about a 401(k) is watching your money grow over your working life. However, those earnings can be dragged down by fees you pay to have your 401(k) managed. How much are these fees, you ask? Well, that's a good question since administrators of 401(k) plans are not required to disclose how much they're charging you and your employer.
But you'll know soon enough ... starting August 30th of this year ... the U.S. Department of Labor will require 401(k) plans to explain their fees and disclose them.
SOT: Greg McBride, senior financial analyst, Bankrate.com
[What seems like a modest difference in fees can take a big slice out of your 401(k). Over a 25-year period, a difference of 1% per year can cut over $50,000 from your account balance.]
Continue VO: You're probably wondering how this disclosure will look and what you'll need to look for. Here's a preview:
- A current list of the plan's investment options ... things like stock and bond funds, stable value or guaranteed funds. Also, an explanation of any fees and administrative expenses ... as well as the performance of those investments over the past one, five and 10 year periods.
- Total annual operating expenses ... expressed as both a percentage of assets and as a dollar amount per $1000 invested.
SOT: [The new requirement to disclose all 401(k) fees will prompt both employees and employers to review what they're paying and look for better, lower cost options. This should ultimately lead to more competitively priced plans for 401(k) participants.]
Remember, you get what you pay for. Some well-managed investments options aren't cheap but provide great results, so employers and employees shouldn't focus exclusively on fees. A diverse line-up of investment options, the availability of investment advice and tools are all valuable elements.
Tag: For the latest retirement news and updates, visit the retirement tab at Bankrate.com. I'm Kristin Arnold.