The 401(k) System: Great for Wall Street, Bad for Retirees [View all]

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http://www.policyshop.net/home/2012/5/30/the-401k-system-great-for-wall-street-bad-for-retirees.html

Here’s a question that you probably don’t want to answer honestly: What fees are you being charged by your 401(k) plan?

Don’t feel bad if you haven’t got a clue, because that puts you in the majority. An AARP study a few years back found that 65 percent of 401(k) account-holders didn’t know they were even paying fees.

This ignorance is no small thing, it turns out, because such fees take a huge bite out of our retirement savings over the long term. According to a new Demos study by my colleague Robert Hiltonsmith, the ordinary American household “will pay, on average, nearly $155,000 over the course of their lifetime in effective total fees.”

That is serious money, especially given that many Americans haven’t stashed away nearly enough for retirement. How do financial firms manage to steer such a big slice of our nest eggs into their own pockets? By hitting us with a blizzard of costs that are difficult to identify and track. A typical 401(k) plan charges administrative fees, asset management fees, and trading fees. Investors even pick up the tab for "marketing fees," paying for all those pesky fund brochures and indecipherable financial statements that your 401(k) provider constantly sends to you.