How much does your 401(k) cost? Don’t worry if you don’t know...most people don’t.
Retirement plan fees can be hidden. Not only are their fees that the 401(k) company charges but there are also fees that are charged by the underlying funds. In fact, often the 401(k) provider will embed their fee in the cost of the plan investments making it super hard for you to see...dirty!
So, what if there are fees on fees on fees in your retirement plan? How do they affect your retirement savings in the long run? We’re so glad you asked! Let’s say you contribute $10,000 a year to your 401(k) for 40 years. Let’s assume you’re portfolio is making a 7% annual return (In reality your annual rate of return would fluctuate from year to year but we’re trying to make a point here). Check out the chart below. Look at the difference between how much money you will have in 40 years with Plan A (0.11% fees) and Plan C (1.34% fees). That’s crazy...and wrong on so many levels! While a 1.34% investment fee may not seem so bad at first, understanding that a 1.34% annual fee means that you will end up with over a half a million less money puts things into perspective!
