If you have a 401(k) chances are you're getting ripped off and you don't even know it.
With all of the associated 401(k) fees, the truth is you could be losing as much as 33% of your retirement nest egg to the financial advisors who run your plan.
Typically, these fees are completely buried in your 401(k) statement-- and even if you do manage to find out how much they are, the fees won't seem like much at first glance.
But over time, the fees can literally cost you a small fortune.
That's because not only do you lose money by paying the fees in the first place but you also lose out on the returns those fees could have generated had they stayed in your account and were reinvested.
If you haven't paid much attention to these fees, you're not alone: A recent AARP survey found 71% of respondents believed they paid no 401(k) fees.
And those who knew of the fees underestimated them by a long shot.
A study by NerdWallet found more than 90% of Americans "dramatically underestimate the total 401(k) fees the average household will pay over the course of a lifetime."
According to the study:
- 38.1% thought average 401(k) fees would cost them less than $10,000.
- 32.8% estimated between $10,000 and $50,000.
- 13.8% believed the fees would total $50,000 to $100,000.
- 7.9% thought the fees would amount to $150,000 to $200,000.
- And 4.1% put the figure at more than $200,000.
The correct response is $150,000 to $200,000 but only 3.3% of respondents picked that amount.
Where Your 401(k) Fees Go
So where do the fees go?...
Administrative fees account for 0.2% to 0.4% annually; asset-management fees, 0.5% to 1%; and fees to market funds, up to 1%. Trading fees vary based on commissions paid to securities brokers and on bid-ask spreads.
When it all is said and done, your retirement plan takes a serious beating...