In his latest episode of HBO’s Last Week Tonight, John Oliver wades through some of the major issues with retirement plans – one of them being the hidden and high fees inherent in many of these plans. Fees, says Oliver, are like termites ‘they infest your investments and eat away at your future, so buyers beware. Even though your returns may reap the benefits of compound interest, so do so-called advisors. Their fees grow along with your money, after all.’
Instead of focusing solely on performance for returns, fees can have a significant impact on your employee’s retirement savings. Even a 1% difference in fees adds up over time. A 2014 Center for American Progress report estimated over the course of a career, high fees could cost you a six-figure sum and shave off 20% or more off your savings balance.
So what are some things you should look for when assessing your plan? Here are a few items to investigate.
1) Understand your fee structure
Are you paying an advisor? Are you charged trailer fees? How about administration fees and Investment Management Fees? And most importantly, if your bank or provider says you aren’t charged any fees that should be a red flag to dig deeper.
2) Conduct an independent review of your fees
When is the last time you did an independent review of your investment fees? If you find your fees are too high you may consider switching providers. Many plans come with fees near 2% on their mutual fund holdings. If your plan has fees that high, with limited investment options, you might be better off moving your money out.
3) Compare your fees to retail funds
One of the perks of sponsoring a retirement plan is that employees benefit from the lower cost that comes with pooling assets and economies of scale. The retail price that an individual would pay for a mutual fund is on average 250 basis points, whereas many company sponsored plans will pay around 150 basis points or less. Over time those savings can have a large impact on your employee’s account balance and the resulting quality of retirement they’ll enjoy.
At Open Access we believe in fully transparency of fees so you know exactly what you are paying for the management of your funds. All of our plan members get a complete breakdown of all fund and manager fees with each statement. If you need help understanding your plan fees, we would be happy to assist. All you have to do is call us at 1-866-625-4777, and we’ll handle the rest.