Since the time which major corporations shifted away from defined benefit plans (pension plans) the responsibility and risk for retirement accumulation moved to the employee. 401(k)’s and other qualified plans or defined contribution plans have been the predominant vehicle for retirement accumulation for most Americans over the last 30 years.
In a recent article published by Forbes, these defined contribution plans, specifically the 401(k), were called into question regarding the fees that are charged to the account owner by third party service providers.
The article goes on to reference a new study by AARP that illustrates how in the dark most American are in regards to their 401(k) plans and the fees charged.
“7 in 10 participants reported that they did not pay any fees in their 401(k)… and 62% said they are unaware of how much they are paying in fees for their plans.” – AARP: 401(k) Participants’ Awareness and Understanding of Fees
“The government has expressed concern that this widespread ignorance is causing significant financial damage. High fees and hidden conflicts of interest are the culprits in causing 401(k) plans to under perform professionally managed traditional pension plans…, a U.S. Government Accountability Office report declared in January.” – Forbes
As a significant portion of the American population moves towards retirement it is all the more important to understand the vehicle in which you are relying on to sustain you in the later years of life. Don’t fall prey to ignorance or complacency…educate yourself today.Resources and References: AARP – Study of 401(k) Participants’ Awareness and Understanding of Fees U.S. GOA – 401(k) Plans, Improved Regulation Could Better Protect Participants From Conflicts of Interest BrightScope – Look Up a Company 401(k) – www.brightscope.com Forbes.com – Find the Fees