“Financial advisers understand there are undisclosed fees on employer-sponsored retirement plans, but an alarming number of clients don’t. In fact, according to a recent AARP study, seven out of 10 participants in such plans have no clue what they’re paying in fees—or how those costs can eat into their retirement savings.
Disclosed fees, such as operating fees and advisory fees, account for only about 10% of the total fees attached to many retirement plans. Hidden fees account for the rest, and they are difficult to understand.”
Laura Stover, “Uncovering the Hidden Fees in Retirement Plans,” Wall Street Journal, March 1, 2013
The Takeaway: Many people assume their 401(k) or 457 plan is “free” or low-cost because they don’t see a detailed accounting of all the costs involved. The truth is that every investment product, account or plan has costs. Some do a better job of disclosing them than others. As fee-only advisors, we disclose our fees to the client. Other types of accounts or advisors, especially those paid commissions, have less rigorous disclosure requirements. So always make sure you are comparing apples to apples, and read plan disclosures carefully to understand what you are really paying for different types of accounts.