This infographic provides insights into what we really dont know about the effects of investment related costs in 401k plans, and what you can do about it.
What you Need to know about 401k investment related costs
1. WHAT YOU NEED
TO KNOW ABOUT
What you can and
should do about it
Ask your current provider for a copy of
your 408b2 employer fee disclosure report.
Its required you are provided one and its
required you read it and understand it.
(we’ll help you here).
1
4
Don’t let any provider or salesman tell you that your
company is too small and does not “qualify” for the
lowest cost investments possible. Nothing can be
further from the truth. Every American worker
has the same rights as any other. If you are told this,
start a process of changing or considering other
options/providers.
2
Get a clear determination as to the average expense
ratios of the investment options in your current plan
and be sure to understand if any additional asset based
fees are being added (most plans with insurance
companies will add these, further eroding your savings).
SOURCES:
LET US HELP
Visit www.americasbest401k.com
to request a proposal or plan analysis
Or call 855.905.4015
3
Begin the process of benchmarking your 401k plan
against alternatives as rapidly as possible to determine
if your fees are reasonable and prudent.
(we’ll do this for you at no charge).
Forbes
LIMRA
PlanSponsor
PLANSMATH
THE OF
401k
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32% of Participants don’t
understand the effect fees
will have on their
retirement savings over time
32%
38%
38% of Sponsors with
plan assets under $25M don’t
know the average expense
ratios of the funds in their plan
40%
40% of plan participants
believe they pay
no investment
related fees at all
50%
50% of Participants
do not know if there are
investment related
fees in their 401k
WHAT
WE
DON’T
KNOW
What we REALLY don’t know
EXAMPLES - THE EFFECT OF FEES OVER TIME
For your assets that are
invested, you must know
how the costs of your
investments
are affecting
your returns
over time
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The expense ratio is
frequently the only cost
that many investors
believe they pay
when owning
a mutual fund
Nothing
is more
Important
regarding
your money than
knowing how much
you have and where it is
Depending on the funds you
have, transactions costs
(brokerage commissions,
market impact costs,
spread costs), Tax Costs,
Cash Drag, Soft Dollar Costs
and Advisor fees may cause
your real cost of owning a
fund to be 3+ times the
expense ratio.
LET’S
GETREAL
They are paying 2.00% in investment
related fees. Using the same comparison
to a plan with .75% in fees, with a
4% assumed return, the plan
with 2.00% in fees will have lost ...
#1 Pebble Cove Software Company
has 20 employees.
Their 401k plan has $1 Million in
current assets and they contribute
$100k into the plan each year.
They currently pay 2.50% in investment
related fees. Compared to a plan that
has only .75% in fees, with an assumed
return of 4% the plan with 2.50%
in fees will have lost ...
#2 Perfect Manufacturing
has 60 employees.
Their 401k plan has $3 million in
current assets and they contribute
$250k into the plan each year.
over
$20,000
over
$1,080,00
over
$201,000
over
$2,200,000
over
$42,000 over
$218,000
PM
P
C
S
1st Year 7 Years 20 Years 1st Year 7 Years 20 Years
RETIREMENT
SAVINGS
LOST TO FEES
let’s put this into an individual perspective
Sally and Joe both currently
have $80,000 in their 401k plan.
They expect to work another
20 years when they will be 65.
And contribute 10,000 per year to
their 401k plan. Sally has investment
related expenses of .52%. Joe’s are 2.25%
At the end of 20 years, with an
assumed 4% return, Sally will
have over $484,000 in her 401k
balance, while Joe, due to the
higher fees will be just
$349,000. $135,000 lost to fees.
What might this mean at retirement?
Let’s say both wanted to convert
their 401k balances to a fixed
annuity with an annual growth rate
of 4% that would provide monthly
payments for 20 years.
Sally could receive nearly $3000 per
month, while Joe only about $2100.
Quite a difference in
outcomes at retirement.
STOP HAVING
YOUR SAVINGS
FLY OUT
THE WINDOW
But what about you?
Every plan and person
has different variables
Give our fee analyzer a test at
http://americasbest401k.com/401k-fee-analyzer/
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