The True Cost of Your 401(k)http://www.fool.com/investing/general/2012/11/16/the-true-cost-of-your-401k.aspx Nicole Seghetti
November 16, 2012
We all know the importance of saving for retirement. But while we mean to give our 401(k)s a good, hard look, oftentimes noble intentions -- like opening that quarterly statement that's been sitting on your kitchen counter since April -- don't always translate into action. Yet making one quick and minor adjustment to your 401(k) can mean major improvements to retiring on your terms.
The high cost of ignoring fees
But, sadly, it seems we aren't giving attention to the fees we pay. A recent LIMRA study shows that 90% of 401(k) participants either didn't think they paid any fees or didn't know the fees they paid for their plans. Everyone pays a fee to have a 401(k), and workers -- not employers -- pay for most plan fees. The average plan "all-in" fee is about 0.78% per year, meaning you fork over $780 annually for every $100,000 you have in your 401(k).
Why all this talk of fees now?
If you own a 401(k), you received these disclosures within the past several months. But a recently conducted Plan Sponsor Council of America survey showed nearly 96% of plan sponsors reported no change in participant behavior as a result of the fee disclosure information. Worse yet, only little more than 1% of participants asked questions regarding the fee disclosure information.
Even though we employees seemingly aren't paying attention, our employers -- likely due to the increased transparency -- are advocating for lower-cost options. According to the same PSCA survey, more than 15% of plan sponsors sent out a request for proposal as a result of the fee disclosure regulations, signaling some due diligence on their part.
Doing the limbo for your dollars
Consequently, brokerage Charles Schwab (NYSE: SCHW ) already offers some ETFs in 401(k)s. Schwab plans to launch an all-ETF 401(k), but it's pushed the rollout back until 2014. Both BlackRock (