401K Fees Can Be Depleting Your Retirement Fund of Thousands

A poll taken by AARP found that 83% of workers do not know how much they pay in fees in their 401K plan. Some didn't realize at all that any fees were being taken out of their 401K plan.

Did you know that thousands of dollars can be taken out, over time, from your 401K plan for money management and record keeping?

The US Department of Labor has proposed that regulations be implemented that will require companies to clearly state and explain all fees associated with your 401K plan. This has come about because of a growing sense that workers weren't getting enough information or sometimes too much information scattered all over.

The fees can usually be broken down into 3 categories:

Administrative Fees: these are the fees associated with record keeping, accounting, operational service and legal fees or services.

Withdrawal Fees: if you need to take a loan out from your 401K or a hardship withdrawal there are fees associated with this.

Investment Fees: these are the biggest fees associated with the mutual fund companies managing your money.
You do have options in saving for your retirement that will overall result in smaller fees.

Always review your 401K statements and learn how to read them. This way you will have a clearer understanding of the fees associated with your plan as well as how good your plan is doing. Be sure to review your account statement, the fund prospectuses, and your plan's summary plan description (SPD) to learn about fees.

You may want to consider no-load mutual funds. They don't charge you a sales commission this way you will have more money put towards your investment.

Index funds are another consideration. These funds are composed of stocks that mirror a particular stock index like the Standard and Poor 500. These usually have lower fees because of the less stock trading and management oversight is required. These are a great alternative if they are offered in your plan.

If your plan charges high fees or contains high cost mutual funds, you may want to talk to your HR representative. Ask you HR representative if they have any alternative investments that will cost you less in fees. If not they may consider looking into other alternatives if enough employees request it.

Avoid early withdrawal fees. Unless you really need the money for an emergency don't take early withdrawals from you 401K. This plan is for your retirement and should remain untouched until you are ready to retire.