Just Like Savings Accounts Did You Realize Many 401(k) Plans Have Fees?
I'll admit it, I'm like most people when I receive anything in my mail related to my 401(k) account I usually don't read it, that holds true for looking at my account statements when the markets are declining. When I receive any account change notices that contain small print most of the time I don't read it. I have learned that I should read all my statements and account change notices since my 401(k) plan had a change in account fees.
If you just graduated from college and just starting working you probably have been asked by your employer to contribute to a 401(k) account. Don't know what a 401(k) is? A 401(k) account helps you to save for your retirement by making monetary contributions from your paycheck into this account. Many employees will also make contribution into your account and many will match what you put in enticing you to save.
Not only are you saving money every week you also investing the money. You can choose from among the investment options available through the plan. The money saved in a 401(k) account, and the growth in the account, isn't taxed until you retire, that is unless you have a Roth 401(k). With a regular 401(k) your deferring taxes on the money you place in the account which allows your retirement savings grow faster.
Now that we have talked about what a 401(k) account is there was a recent survey released by AARP that showed over 70 percent of people with a 401(k) thought that they weren't paying any fees at all. The fees include investment fees for the mutual funds, stocks, bonds and other investments in a 401(k) account.
These fees can be anywhere from 0.25 percent to over 2 percent. Over the course of 25 or 30 years a small percentage can take a big chunk out of your retirement account. A 1 percent difference in fees can add up to tens of thousands or hundreds of thousands of dollars difference in your retirement account. Therefore you should pick a plan that either doesn't have any fees or the lowest fees. Just like you would search for the best savings rates or money market rates on a deposit account to earn the most.
There is a new rule that says your 401(k) plan provider will have to disclose any fees on the account. The new rule from the Department of Labor say you must be send an annual disclosure about the accounts fees. You probably have received them already or will receive them. The Department of Labor also provided this interesting video on account fees. In this video you can see how these fees lower your account balance over 30 years:
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