Tags: 401k | retirement | fees | investing

CNBC: 3 Ways to Make Improvements to Your 401(k) Plan

CNBC: 3 Ways to Make Improvements to Your 401(k) Plan

By    |   Friday, 20 November 2015 06:00 AM

A 401(k) is one of the best ways to set aside money for retirement, and it’s important that participants in the plan evaluate its quality compared with other plans.

“A bad plan, with exorbitant fees and poor fund choices, can mean surrendering hundreds of thousands of dollars in retirement savings during the years of investing,” writes Ilana Polyak on the CNBC.com website. “Fees, for example, vary widely from one plan to another, and it's hard to know how much you're paying.”

The three fees to monitor are for investment management, a 12b-1 fee used to pay commissions to brokers and salespeople and the plan administration fee. There also may be feeds for additional services, like borrowing from a 401(k).

These fees can add up to 0.5 percent to 3 percent, according to an expert cited by MarketWatch.

"Taken over an employee's lifetime, that can make a huge difference in what [workers] get to spend in retirement," said David Walters, a CPA and certified financial planner with Palisades Hudson Financial Group.

Three Ways to Improve a 401(k)
  1. Use index funds when possible because they tend to be less expensive than actively managed ones. Make sure to check the fees, though.
  2. If available, use the brokerage window to invest in any mutual fund, exchange-traded fund or stock that is available for trade at any brokerage. The window gives access to the whole universe of low-cost fund options and exchange-traded funds.
  3. Talk to your boss about how to improve the plan. In small companies, the company owner is likely to be the plan's largest participant and is shouldering the bulk of the fees.
Meanwhile, Bloomberg reports that a retirement crisis looms as many companies don’t offer 401(k) plans.

Half of U.S. workers lack company-sponsored retirement plans while 45% of businesses with fewer than 100 employees offer 401(k)s, Bloomberg reported.

“The current 401(k) system was designed for a workplace that doesn’t exist for most people: lifetime careers at big corporations that offer benefits,” says Teresa Ghilarducci, an economist at the New School who researches retirement policies.

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A 401(k) is one of the best ways to set aside money for retirement, and it's important that participants in the plan evaluate its quality compared with other plans.
401k, retirement, fees, investing
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2015-00-20
Friday, 20 November 2015 06:00 AM
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