Monday, December 8, 2008

Hidden fees could be killing your 401(k)

This is part one of a three part series on Bloomberg TV. If you want to watch more you can easily find it on YouTube by searching for "401k Hidden Fees" or, just click the subsequent videos below.

As if the market wasn't already killing your 401(k), hidden fees could also be stealing from you. Even if your fund is not earning anything fees can dip into your contributions. And the really maddening thing is that you can't easily detect it.

You could question your benefits administrator but it's not likely that they will know. You could read through your plans prospectus, but that thing is purposely written to confuse. You could take the prospectus to a lawyer who specializes in 401(k)s, but that will cost you money as well without a guarantee that you'll uncover or recover anything.

In July of this year the Dept. of Labor proposed that 401(k) plans disclose all fees. Meanwhile, there isn't much you can do expect try to scrutinize your plan by close watch on your account. Or you could try experimenting like The Finance Buff did.

In Are You Getting Your 401(k)s Money Worth? Dr. Shelby writes:
"So, what can you do? You can demand that low-load or index-linked or exchange-traded mutual funds are included in your plan. Ironically, not only are the fees lower on these fund selections but the performance is generally superior to those chosen by the high-fee, hyperactive managed dogs recommended by your broker. You can insist that your employer put an in-service, non-hardship withdrawal provision in your plan which allows you to take out of the plan the vested money your employer has contributed at an age below 59-1/2. Also, this non-hardship provision will allow you to take the money you’ve contributed at age 59-1/2 without penalty and without triggering taxes if done correctly. Sadly, your employer is generally not aware of such provisions and you can bet your last dollar that the broker or administrator are not going to break their silence."

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