Comments on: What Do You Do When Your Company’s 401(k) Fees Are High?

By: Jay

Jay — Tue, 19 Aug 2008 20:54:06 +0000

I think there is a lot of shady stuff that happens. I work for a small company (250 employees) and the CFO made our decision with a broker.

The problem is, the broker who is part of some local business community that essentially passes business between each other that our owner supports. There are apparently political considerations in selecting the broker and “what’s best for the employees” isn’t really the primary factor.

So now we’re stuck with ING offering 12 plans, no index funds, and averaging 1.5-2.5% total cost. The better part is, they don’t disclose sales fees on shares and half the time the share prices don’t match up with the statements because they’re designated as some obscure share class.

What we really need to be able to do is pass a law allowing free withdrawal of money after 1 year. Why the hell are we not allowed to move our own retirement money?

By: Advisor Bill W

Advisor Bill W — Tue, 29 Jan 2008 20:17:10 +0000

While the fees are excessive, the match makes up for a lot, but there’s no reason to put up with excessive fees. I picked up a copy of this book that actually shows you how to proactively get your employer to change your 401k without political whiplash. It’s called Stop the 401(k) rip-off by David Loeper (www.401kripoff.com) and there’s a link on the right to Fundgrades.com which actually considers expenses in the grading of funds.

Also, I’d be careful of those target date and lifecycle funds…while they’re easy, they can cost your lifestyle dearly. See this educational article that was written for financial advisors if you want to learn more about it: http://www.financeware.com/homepage.asp?showsnippet=01.02.08.wem

By: Scott Brooks

Scott Brooks — Sun, 02 Dec 2007 21:50:05 +0000

In service rollovers are sometimes allowed when someone
turns 59 1/2 or they work for a division which is sold or merged with another firm.

The options depend on the what the provider allows.
Those 401k fees are very high, but the $5000 match should
make up for a LOT!

I once saw a Principal plan were a business owner was paying $4500in fees to cover 2 employees!

By: Hal

Hal — Wed, 17 Oct 2007 16:04:32 +0000

When my small business began researching 401Ks, I invited employees to any sales meetings. One sales rep slyly suggested that a private meeting might be desirable, slyly hinting that some benefit might accrue to the employer that selects their plan. Knowing this is happening “out there,” you might have even more care: those high fees might be more than meets the eye.

By: Stuart

Stuart — Wed, 18 Jul 2007 20:31:12 +0000

Going with the index funds in your 401k and suggesting your employer check out a few companies and sites at the same time seems the way to go. As a Costco lover, be aware that Costco is now offering 401ks for small businesses provided by ShareBuilder with some good pricing. ShareBuilder looks impressive and has a fairly unbiased educational site on costs and fees for your boss at 401kcostguide.com. They promote are promoting that participants should not not pay more than 1% fees all in (expense ratios, mgmt fees, etc…. Hope this helps,
Stuart

By: what to do

what to do — Wed, 18 Jul 2007 19:38:36 +0000

“I would suggest asking the employer to offer a brokerage window through TD Ameritrade or another low cost firm. This would sound to the employer like an enhancement, rather than sour grapes over high costs.”

I like the sound of Jim Bigham’s suggestion. Can you elaborate a bit? Would the brokerage window be separate from the high fee 401k plan? Would it use pretax $$?

Thanks!

By: Anonymous

Anonymous — Wed, 18 Jul 2007 18:27:42 +0000

My employer switched 401(k) administrators a couple years ago. I suspect that high fees played a role in the decision. Our previous plan had the dubious benefit of a financial advisor to help us pick which funds to put our money into. The “advisor” I talked to disagreed with my assertion that the selection of high-fee funds was lousy.

By: yu now who

yu now who — Tue, 17 Jul 2007 15:40:32 +0000

to Jonothan,
Most 401(k) plans do not allow “in service” rollovers.

By: Jonathan C

Jonathan C — Mon, 16 Jul 2007 21:19:03 +0000

Hi,

I actually ruminated about this a bit on my blog, too.

My recommendation is to contribute in order to maximize your companies match, then rollover the proceeds *each* year into a free IRA, managed by somebody like Fidelity or Vanguard. I believe that you can roll over your assets from the 401(k) even if you stay with your employer. At least, I know that I can with my 401(k) plan.

That way you can get the $5000 match each year, avoid early withdrawal penalties and taxes, and still watch the money grow tax-deferred until you retire in a fund or stocks with much lower expenses.

Cheers,
Jonathan

By: Free Money Finance

Free Money Finance — Mon, 16 Jul 2007 20:30:22 +0000

Star Money Articles for Last Week

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