401(K) Fee Disclosures Now Required by DOL

More often than not, when I ask a client about their 401(k) fee structure or plan cost, the answer I get is, “There is no cost. My company uses no-load mutual funds. It’s free.”

A survey sponsored by AARP, found that 71% of retirement plan participants believed they did not pay any fees at all. This is understandable, but shocking! That’s because this information is rarely disclosed.

The impact of fees and commissions on your retirement can be significant. This is especially true if your plan selections include variable annuities.

Let’s say that when you opened your 401(k) statement, you saw that on a $100,000 balance, you made 6% last year. That sounds reasonable in these tough economic times, but what really happened?

Suppose that your “undisclosed fees” were 4% and, as is usually the case, that 4% was taken “right off the top.”

In terms of dollars and cents, that means if you made $6,000 on a $100,000 balance, your true profit was $10,000. Why the $4,000 difference? You gave it up in fees and commissions.

The long term effects of these costs can be stunning. According to Demos, a research and advocacy firm based in New York City, “Over a lifetime, fees can cost a median-income, two earner, family nearly $155,000 and consume nearly one-third of their investment returns.”

Now, you will finally be able to see what you’re really paying! New Department of Labor regulations took effect last week. The new rules require most retirement plan service providers to disclose their fees and commissions. As of July 1, written and regular disclosures must be made to your company. By August 30, individual disclosures must be made to the each and every plan participant.

We here at Financial Abundance have always believed in full disclosure and we have always disclosed our low fees. We will continue to do so for all of our retirement plans and participants, including those not covered by the new Department of Labor regulations.

Here’s a link to a very informative 3 minute video on these new rules. Don’t hesitate to give me a call if you would like us to analyze your 401(k) and other retirement plans.


About Paul Nichols

Paul is the founder of Financial Abundance, a Registered Investor Advisory firm and EDI, an Estate Planning Firm with offices in State College and Lewisburg. He has been working with individuals, families and businesses for over twenty years, including many Fortune 500 companies. He has educated tens of thousands of people through seminars, workshops and various international speaking engagements where he shared the stage with many notable individuals such as Ronald Reagan, Robert Kiyosaki (author of Rich Dad, Poor Dad), Mike Ditka, General Schwarzkopf, and Newt Gingrich to name a few.

In 2000, after many years of traveling to consult companies and individuals, Paul decided to relocate from Colorado to State College, PA (his wife’s hometown) to develop a local advisory firm.

Paul operates under the core belief that education plus understanding leads to clarity and confidence; resulting in peace of mind. He is a proud father of three and devoted husband of 20 plus years.

Some of Paul’s accomplishments:
Regular contributor to the Centre Daily Times, via the “It’s Your Money” blog
Featured in the movie Navigating the Fog of Investing
Regular contributor to Town & Gown as the publications Investor Coach
Host of the weekly iTunes Podcast, It’s Your Money
Member of the Western PA Better Business Bureau
Member of the Centre County Chamber of Business and Industry