A Penny And 401k Fees Both Overpriced

Penny for Your Thoughts: You Pay More For 401k Than You Think

The U.S. Government has recently engaged in serious talks to abandon the production of the penny. Why? Because each penny costs 1.4 cents to produce, resulting in a cost of more than $100 million per year to taxpayers. If you’re a 401k investor, does this sound familiar? How so, you ask? The answer lies in knowing how much you’re paying in the hidden investment fees associated with your 401k account. Based on NerdWallet research, nearly 92% of people have no idea what they’re paying in 401k fees.


Why Paying 401k Fees Can Be a Big Deal

Fees unnecessarily sap the potential long-term results of your 401k. The average American will pay $138,336 in 401k fees. That’s 2.5 years of earnings for the average U.S. household.

Want to see the fees you could strike from your life? Check out our hidden fee calculator to get an estimate. Or, evaluate your actual account for a truer picture.

When Should I Check What I’m Paying in Fees?

You should review your investments periodically (we recommend several times a year – or you can hire us to do it) for a number of items including the fees you’re paying. The fees will be reflected on your statement as an “expense ratio” that is shown as a percentage of 1%. The expense ratio can vary widely, with some products charging more than 1% ($100 per year for $10,000 invested) and others charging only 0.05% ($5 per year for $10,000 invested).

If you’re invested in a target date fund (TDF), you should definitely take a look at what you’re paying in fees. While the average expense ratio is coming down, it’s still high at .73%.

How blooom Helps?

We’re able to reduce the hidden fees for more than 80% of the people who come to us. As of Oct. 24, 2017, we estimate we’ve saved our clients $587,125,065 in collective lifetime fees*.

*blooom client hidden fee lifetime savings projection based on a 7.0% gross annual return, median client balance of $45,106, $5,000 annual contribution increased annually by 3.0% inflation, 27 years until retirement and median pre-blooom expense ratio of 0.608% compared to 0.234%, the median expense ratio after signing up for blooom, multiplied by the number of current blooom clients.

 

Jordan Nietzel

Director of Investment Operations at blooom, inc.
Jordan Nietzel is the Director of Investment Operations at blooom. He has spent the entirety of his career in financial services helping individual and institutional clients achieve their financial goals. Jordan is committed to delivering sensible investment advice in a way that is simple and easily understood.

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