401 (k)s and the Cost of Your Employer Ripping You Off
Many employees in corporations and business are eligible for any retirement funds two to three months after they are hired. For some companies it can span up to a full employment year before being asked if they would like to join in a 401 (k) plan for when they retire. But there are some things that don’t go unsaid, and one of them is the high fees and expenses that come out of your retirement account while someone is managing it for your company.
The Employee Fiduciary released a study on the plans and deals employers offer in a company for any retirement savings. Some of the plans these employers use includes a 2% investment interest for employees to invest in their retirement. The 0.5% interest that other plans offer the same investment interest as those whose companies charge 2% of the investment into the retirement account.
In a previous John Oliver story on HBO, most of the retirement money put in the account is often divided up in the types of people that invest your money for either your personal gain, a fiduciary, or for their personal gain, a broker. But when it comes to getting the retirement funds, sometimes the amount of money you saw over the years grow and expand, is not as much as you hoped to receive when you retired from your company. But the question shouldn’t lie with the people who work your account, it should be the amount they charge and the money overtime being taken out to pay for their work.
Your employer may outsource companies who help with retirement investment. So the fees and the amount of investment interest is often higher in some places and lower in others. But one example is the asset based costs that surround money managers, bookkeeping and administration expenses, in which they have liberty to charge their own fee or deduct a certain amount from your retirement account. However, the good thing about company policies on retirement funds show that some companies are willing to cover the cost for the employee, but they pocket a small fee each year from that account. These types of pocketed money is known as an expense ratio and for some can range as high as almost 2%. So even if you land a good company who can pay for your retirement and cover the costs of the asset fees, they still deduct 2% each time from your retirement account. So while you scrimp 10% of your paycheck into your account, your employer can deduct 2% of this money out of your account each time.
While the survey does focus on the smaller plans of retirement savings, there is something important people can always do to make sure they get more money in their retirement account to live off of and that is to shop around and look at other potential investors who can manage your fees that are not covered by your company’s retirement investors. It is even easier to ask your employer if he can look into other retirement savings plans that have lower administrative fees and interest rates. One man found a 401 (k) plan that charged under 1% in annual interest and under 0.10% in levied administrative expenses. The possibilities of getting more money out of your retirement savings can be the most helpful ways to make sure you get the best for your dollar and employment history.