Opinion

John Wasik

Saving for retirement? Watch 401(k) fees

Jul 21, 2010 21:33 UTC

The following is by John Wasik, a columnist for Reuters.com and author of “The Audacity of Help: Obama’s Economic Plan and the Remaking of America.” The opinions expressed are his own.

I’m not one to get excited over new government regulations, but you need to pay attention to some new rules just issued on 401(k)-type plans by the U.S. Department of Labor.

I bet you don’t know that more than a half-dozen fees can eat away at your retirement funds. The rules will tell you how much your retirement plan is costing you. Not only will you be able to tell how much your kitty is being diminished every year, you’ll be able to lobby your employer to cut expenses.

downloadThis is empowering for the more than 50 million defined contribution plans like 401(k)s and 403(b)s which have about $7 trillion invested. Since most employers pass these fees along to you—and they are deducted from your account—you may not realize how consistently your wealth is being depleted. It’s cruel and silent, although you can do something about it.

Seemingly trivial expenses add up to devour your retirement account. Say you have a $500,000 401(k) balance and are saving over 30 years at a modest 5 percent. At 1.5 percent in annual expenses, you will have paid more than $400,000 in fees and lost $386,000 in earnings.  Knock those expenses down to 0.5 percent and you’d save $485,000 over three decades.

Introducing John Wasik, Reuters.com columnist

Jul 21, 2010 20:18 UTC

The following is by John Wasik, a columnist for Reuters.com and author of “The Audacity of Help: Obama’s Economic Plan and the Remaking of America.” The opinions expressed are his own.

This is not a column about money. It’s about your life.

I see money as a tool to get you where you want to be. My aspiration is to help you save, plan for your retirement and college expenses, deal effectively with taxes, manage your real estate, invest prudently and take care of your complicated family finances. I’m not interested in quick stock or mutual fund picks that might lead you astray; I’m concerned about your relationship to your investments, income, family and the rest of your life.

What should you be doing given that you may be working longer and living into your ninth and tenth decades? After more than a quarter century of writing about (seven books, countless articles) and advising folks on personal finance, I don’t have all the answers. Yet I’ll certainly try to provide some fresh and useful insights on how you can best succeed.

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