“401(k) fees are costing you hundreds of thousands of dollars over your lifetime.”
I don’t particularly care for hyperbole, but it is important for every single 401(k) participant to read this article in The Atlantic. (Not this blog post – the actual article.)
The author’s example uses a 25 year old contributing $3,000 to her 401(k.) The author then does the calculations, comparing what happens when using an “index” fund with an internal management fee of 0.08%, compared with an “active” fund with an annual fee of 1.33%.
Assuming an identical investment return of 7%, the article shows there would be $159,000 more in the 401(k) account using index funds than active funds at age 65. At age 70, the difference is $257,000!
If you enjoy or are willing to manage your own 401(k,) contact your plan provider. Or just make the changes in your investment choices.
If you’re not someone who does these types of things on her own, many Financial Advisors will also advise you on your 401(k) . . . ironically . . . for a fee . . . which might . . . or might not – be worth it.