401(k) fee disclosures

A new Federal rule requires that as of July, 401(k) providers must clearly disclose to employers for the first time the fees they charge the retirement savings plans for investment management, record keeping, administration and other services.  Under the new rules, the Department of Labor will require plan providers to disclose detailed 401(k) fee information to employers. The companies must then share that information with their plan participants.

It will be a new experience for employees who were not aware of the fees and expenses that they have been incurring in their 401(k) plan.  However, it’s not a time to panic or make any rash decisions to sell funds with high expenses and buy funds with low expenses.

The first order of business is to create an asset  allocation that is appropriate for your age, your risk tolerance and your objectives.  If you need help with that you can consult a financial planner.  Examining the objectives of the funds, their track record and their risk profile gives you a better idea of the funds you should invest in than their expenses.  Of course, it there are two funds with similar characteristics, the one with the lower expenses would be the proper choice.

And as we have previously discussed, the use of company stock in a 401(k) should be avoided or strictly limited.

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