Category : planning

401k Fees Eat Holes in Money Socked Away

What The Heck are 401k Fees and How Do You Kill Them?

The saying “ignorance is bliss” doesn’t apply to hidden 401k fees. We frequently reference them … and for good reason. According to research from NerdWallet, people with 40 years until retirement could lose as much as $500,000 because of investment fees.

Worse yet. Most people aren’t AWARE they are paying these fees. An incredible 92% of Americans have no idea how much they pay in 401k fees.

We’re going to provide a simple break down of the fees found in your 401k. We’ll also review what, if anything, you can do about them.

Providers Have Three Main Types of 401k Fees

Investment fees are specific to each investment option your plan offers and typically the loftiest type of fee. Luckily, you can usually control – or get help to control – these types of fees. They can be reduced by simply choosing to invest in funds that have lower expense ratios.

Other types of 401k fees, administrative and service fees, are more difficult for you to reduce, as they are an innate part of your provider’s plan.

Here’s the quick overview of the three main types of fees:

  1. Investment fees – Expressed as an “expense ratio” of anywhere from 0.01% – 3%. Our team will call these “fund specific fees” or “fund fees.”They cover the management of the investments within your plan. And they typically represent the largest component of fees. Generally assessed as a percentage of assets invested, they are deducted directly from your investment returns: Investment fees are taken out annually as a percentage of your investment.
    • Sales charges – transaction costs for buying/selling shares
    • Management fees – for managing the assets of the fund, often used to cover administrative expenses
    • Other fees – to address services such as furnishing statements
  2. Plan administration fees – The fees charged to keep your plan running. These fees include recordkeeping, accounting, legal and trustee services that are necessary for administering the plan.
  3. Individual service fees – typically associated with optional features offered under a 401k plan. Some additional services may include access to a customer service representative, educational videos or seminars, planning software, investment advice, or online transactions. The more services provided, the higher the fees. The cost typically corresponds with the size of your employer’s 401k plan, i.e. there are benefits of scale (the following are the typical fees by employer size):
    • 1.4% for small employers
    • 0.85% for medium-size employers
    • 0.5% for larger employers

Investment Fees Pile On – They’re Vermin You Want to Control

We sometimes hear from people that they don’t need to worry about investment fees because their account balance is relatively small. But here’s the rub: Fees negatively affect your 401k (or other employer-sponsored retirement plan) in several ways.

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DayCrunch Pick 24 Time Infographic Game

Time Infographic: Unlock 30 Hours of To-Dos Per Day?

Seven or more hours of sleep per night? That’s what the National Sleep Foundation recommends for adults. A half an hour of exercise each day? Those are numbers from the Department of Health and Human Services. One hour to eat per day – says who? The USDA, that’s who. With so many things to do in life, we decided to crunch all the numbers of what the experts “recommend” you do in a 24-hour period — and the total adds up to 30 hours in this nifty time infographic!

Well, that’s life for you: 30 hours of steps to perform in 24 hours of moves. See how we can free up a move for you!

Meet Our Fictitious Player Kari: She Can Relate to the Time Infographic

Kari’s a 37-year-old single mom with two kids: Jasper, who’s 8, and is always playing baseball; and Cassie, a 4-year-old who enjoys finger painting butterflies.

Kari works full-time at a local department store, and loves picking up her kids from school after work. Once they’re all home, Kari feeds the kiddos, helps them with their homework, puts them to bed, and finally makes sure everything is all set for the next day. After that, she decides to spend some time before bed researching 401ks and financial planning. But 10 minutes into her research, she falls asleep. Her 24 hours are up, but the time infographic says she has six more things to do.

Sound familiar?

A Managed Account Can Help You Lifehack a Move

At this point, you’re thinking the same thing as Kari: How in the world can I get all this done? Life is a tough game. We all have hectic schedules and can relate.

We’re not positive whether you can lifehack your way to all 30 moves. But we do know one thing — a managed 401k account is one lifehack you can play to get closer.

So … what is a managed account?

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Study Abroad at 37? How to Hoard Cash for Return to College

This is part two in a three-part series addressing how people can save for college or reduce or eliminate student loan debt.  In our first post, we shared some tips that are “better than faking your death” to pay off student loan debt. In this sampler tray (or beer flight) of savings ideas, we’ll share how adults who are looking to return to college can find financial assistance or reduce the cost of post-secondary education.

We covered the reasons why in more detail in our first post, but we’re chatting about college savings and student loan debt for two reasons:

  • First, plain and simple. The quicker you can wipe out debt, the quicker you can start saving properly for other life events.
  • Second, we recently launched a personal financial advice service. Clients can access it via mobile or desktop using the chat feature on the bottom-right of the screen. Since we’ve launched, the topic of student loan debt has been a top question posed by our clients.

A Happy Hour of Options for Adults Wanting to Return to College

So maybe you’ve always eyed going back for that graduate degree. Perhaps you launched yourself into the workforce early and never quite finished your undergrad. Or you’re looking to make a career change. Whatever your reason for returning to the BIG U, many options exist for scholarships, financial assistance and strategies to reduce your overall cost.

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401k Management Requires Dissection

What Do an Appendectomy and 401k Management Have in Common?

Picture this. You start to feel a dull sense of pain around your belly button that shifts to your lower right abdomen. Within just a few hours the dull pain has escalated to a sharp pain that can no longer be ignored. When you move, the pain gets excruciating and if by chance you need to cough or sneeze – you’d better be gripping onto something!

At this point, you realize you need to get your butt to the ER. After what seems like a million bumps in the road on the way to the hospital, you check yourself into the ER. The ER doctor then begins the examination. After just a few moments of probing your lower abdomen — she is confident that you have appendicitis.

The doctor explains that if appendicitis is not treated quickly, the appendix can rupture. When that happens, it releases bacteria into the abdomen and potentially leads to other, life-threatening infections.

Because of this danger she explains, appendicitis is considered a medical emergency. It typically needs to be removed within 24 hours of the condition being diagnosed. Given the amount of pain you’re are in, surgery sounds like the least of your worries. So, you tell her, “Let’s do it! Get this thing out of me. Nobody even knows what the heck an appendix does anyway!”

Then comes a response that you were not at all expecting. Instead of starting the process to prep you for the appendectomy, she instead asks you just about the …

Strangest Question You Would Expect a Doctor to Ever Ask

“I would love to perform this appendectomy, but before we can proceed, I need to know how much you have saved for your retirement?”

You are thinking … WTF!  What in the world does my retirement saving have to do with this emergency surgery? But given how much pain you are in, you will answer just about any question if it means getting you closer to the pain meds.

“I have about $70,000 saved up in my 401k,” you answer proudly. Still, you hadn’t seen the 401k management questions in the admittance form. What’s this about?

Her reply leaves you totally dumbfounded. “That is great but, unfortunately, you don’t have enough saved for ME to perform the appendectomy you badly need.”

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Diversification Definition - Choosing More Than One

Popular Timberlake Love Song Works as Diversification Definition

We’re back with another edition of Retirement Jargon Sampler! Here’s where we break down all the daunting terminology associated with 401ks through the use of some of America’s favorite tunes. Today’s hit serves as a diversification definition.

You might’ve already seen our latest post about the importance of diversification from Jordan, one of our top-notch advisors. For those of us who aren’t top-notch finance experts, the semantics of “distributing assets” can be damn confusing. So let’s rock our diversification definition.

The Simplest Stance on Diversification? Justin Timberlake’s “What Goes Around Comes Around”

Here’s where Justin Timberlake comes to smash the jargon into pieces. In JT’s tear-jerking 2006 song “What Goes Around Comes Around,” he cries to his lover’s new decision to leave him and play the field:

“Is this the way it’s really going down?
Is this how we say goodbye?
Should’ve known better when you came around (should’ve known better that you were gonna make me cry)
That you were going to make me cry
Now it’s breaking my heart to watch you run around
‘Cause I know that you’re living a lie
That’s okay baby ’cause in time you will find
What goes around, goes around, goes around …”

Diversification Definition Through Poor Justin

All apologies to the ever-heartbroken Justin, but the reality is his lover is a young and hot commodity – she has the freedom to explore a variety of exciting suitors rather than being tied down to one boring person just because he’s a safe bet. After all, seven free dinners a week are better than one. Not this lucky when it comes to dating? Don’t panic! Spread your assets around in another way…through diversifying your funds.

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