Changing jobs? How to protect your 401(k) from hidden fees
Context:
Hidden fees in 401(k) plans can significantly impact the growth of retirement savings, costing workers thousands of dollars over their careers. Many American workers are unaware of these fees, which can increase after leaving a job as previous employers might have been covering them. The fees are often not transparent, being buried in complex plan documents, but understanding how to locate and manage them is crucial. Workers should familiarize themselves with terms and documents like the 401(a)(5) fee disclosure to better manage these costs. Although fees cannot be entirely avoided, minimizing them can allow more money to be invested and grow over time.
Dive Deeper:
Hidden fees in 401(k) plans are a significant concern, as a U.S. Government Accountability Office study found that 41% of American workers are unaware of these fees, which can cost thousands over the years.
After changing jobs, employees should be aware that old employers who previously covered retirement account fees may no longer do so, exposing workers to unexpected costs.
The process of identifying fees can be complicated due to complex labeling and buried information within the 401(k) plan documents, making it essential to know where and what to look for.
The 401(a)(5) fee disclosure is a critical document that details the fees associated with a 401(k) plan, and it is often available via the plan's website or the company's human resources department.
401(k) fees typically range from 0.5% to over 2% of plan assets annually, and if fees exceed 0.5%, it may be an indication of paying too much, thus reducing the potential growth of retirement savings.
While it is impossible to completely eliminate 401(k) fees, being informed and proactive in managing and minimizing them can significantly impact the amount of money that remains invested.
Prospectuses for individual funds within a 401(k) provide detailed investment information, including associated fees, and can usually be accessed online or requested from the plan administrator.