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Is your 401k free?

In the days of Wall Street excessiveness and corporate greed, the only thing not yet looked at is your retirement plan and it’s cost. For most, your 401k plan is your greatest financial asset. How many believe or have been told that this account is “free”? Not true!

Would you be shocked to find out that the average 401k fees are 2-3% of the account balance? For example, an employee with a $50,000 401k balance is paying $1,000 - $1,500 per year. Why? Costs are currently ‘rolled into the plan.’ Let’s look at who gets what:

Would you pay your personal financial advisor these kinds of fees? If you said ‘yes’, I know of several advisors that would quickly put you on their “A” client list. Fortunately, the U.S. Department of Labor is looking into this. 29 CFR Part 2550 Fiduciary Requirements for Disclosure in Participant-Directed Individual Account Plans is moving to change the way 401k plan fees are disclosed to employees. Originally designed to go into effect in 2009; beginning July 2011, according to the legislation, employers will be required to inform employees via their quarterly statements, just how much is taken from their balance. What do you think the person in our earlier example is going to think when she realizes that her “free” employer sponsored 401k is costing her $1,220 per year?

Retirement Solutions LLC of Madison, Wisconsin has come up with a solution, their flat fee 401k. Why hasn’t your plan sponsor off you this? Because they don’t want to lose their lucrative commissions! This plan makes use of some of the least expensive mutual funds available. The portfolios are time tested strategies that allow participants to sleep at night. Let’s look at the same plan as before and see what the fees look like:

For the same plan, each participant saves 1.11%. In the case of our $50,000 plan balance, the employee would keep an additional $555 per year in her account. That is, if the fees were continued to be “rolled into the plan”.

The beauty of this new approach is that the fees can and should be paid by the employer and then deducted off the employer’s taxes. This scenario would make the required disclosure read $0. Will your people be happier than your competitor’s employees? Companies who get ahead of the curve may find it easier (while others catch-up) to recruit some of the best talent in their field.

One last point, Retirement Solutions' Flat Fee 401k, will greatly reduce the employer’s fiduciary liability. In plain talk, the employer is in a better position if their employee decides to sue due to the employee’s own poor investment decisions. Unfortunately, this is happening more and more.

If you need to start a 401k or want to review your current 401k fees call us at (608) 275-7850 to set up a free consultation appointment. Quit paying high commissions and start saving money today.



Flat FEE 401k saves you money

Would you be shocked to find out that the average 401k fees are 2-3% of the account balance?

(608) 275-7850