New rules about 401(k) charges finally surfaced from the Department Of Labor last month. Since 401(k) plans have become one of the largest assets owned by U.S. households today, the whole idea behind these rules are to help consumers have a good idea about the fees charged in these retirement plans.
Beginning January 1st, 2012 your statements will have a whole new look laying out most of the fees and charges in plain language. The new regulations will affect about 483,000 retirement plans and 72 million workers who will be able to gain a better feel about what they are paying for in the plan. (source: www.miamiherald.com)
The details may be able to help investors fill a big void because many people don’t know about the litany of fees that may be charged against their 401(k) account for recordkeeping, investment advisory, brokerage, or other administrative services. Sometimes, as many as 6 to 8 indirect fees and expense can be charges which are often shaved off the top before investment gains. One percentage point in fees will reduce overall retirement income by 28% over a lifetime. (source: Department Of Labor)
Having done this business for 20 years, most 401(k) plans today are sold when the owner of your company has a friend in the financial services business. Often, the companies don’t shop three or four 401(k) plans, but rather pick a plan based upon the personal relationship that they have with the broker. Unfortunately, this often leads to 401(k) plans littered with proprietary mutual funds, poor individual service, and additional fees tacked on to the plan to pay the broker.
There is no free lunch for investing, and hopefully this legislation will allow 401(k) participants a better idea of what they are paying for with their precious retirement assets. Make sure to open your statements, and take a peek at what is going on with your retirement money when 2012 comes around, and ask your employer here in 2011 to get you a plan with lower costs so you too can retire early!!
oXYGen Financial, Inc. co-CEO Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice to the X and Y Generation.
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc.
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