{"id":6058,"date":"2013-03-23T11:38:05","date_gmt":"2013-03-23T18:38:05","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=6058"},"modified":"2016-12-21T07:30:42","modified_gmt":"2016-12-21T15:30:42","slug":"in-401ks-the-problem-is-fees-not-complexity","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/in-401ks-the-problem-is-fees-not-complexity\/","title":{"rendered":"In 401(k)s, the Problem Is Fees, Not Complexity"},"content":{"rendered":"

It’s a recurring theme among financial advisors and the personal finance media: 401(k) savers have too many choices. They are overwhelmed.<\/p>\n

Admittedly,\u00a0most normal people are not plugged into the arcana of retirement investing<\/a>. They don’t know a value fund from a money market, an ETF from a traditional mutual fund.<\/p>\n

\"fees\"<\/a><\/p>\n

Bonds\u00a0funds are plain mysterious, and stock funds are sold on misleading three- and five-year returns.<\/p>\n

So the plans try to \u201csimplify\u201d by limiting choices. Often, you can buy just 10 to 12 types of investments, ranging from cash-like stable value funds to bonds and a collection stock funds.<\/p>\n

So far, so good. But here’s where the problems really begin.<\/p>\n

Yes, retirement savers get a pretty nice carrot to incentivize saving in the form of tax deferral and company matches. But they also get a huge stick alongside it: punitively high fees.<\/p>\n

The\u00a0Wall Street\u00a0Journal<\/em>\u00a0reviewed comparative data and came up with\u00a0the best characteristics of a well-run, affordable 401(k) plan<\/a>.<\/p>\n

Total\u00a0expenses, they concluded, should come to less than 1% and hopefully no more than 0.75%.\u00a0Target-date funds, the kind that automatically change to lower-risk investments as a worker gets older, should cost less than 0.6%.<\/p>\n

The newspaper gave a \u201cred light\u201d rating to plans that charge more than 2%, which is often the case with small-company plans.<\/p>\n

Comparatively, BrightScope, a firm which rates 401(k) plans, figures 0.5% is the cost investors should aim to pay. That’s four times less!<\/p>\n

Nevertheless,\u00a0some plans charge even more \u2014 up to 3% \u2014 but break the fees up<\/a>\u00a0to reduce the \u201csticker shock\u201d effect, 0.77% for a stock fund then another 1% for plan management, plus various pass-through fees for commissions and the like. Like signing a mortgage closing, the checklist of small-seeming 401(k) charges adds up fast.<\/p>\n

The Labor Department this past year\u00a0enacted new rules requiring 401(k) plan administrators to bring fees into the light<\/a>\u00a0for retirement investors.<\/p>\n

Meanwhile, the big consumer brokerages have made moves to cut the costs of their exchange-traded fund (ETF) offerings. Many trade commission-free and fund management fees have been falling for months, across the board.<\/p>\n

This should be the solution that 401(k) savers need, but we’re not there yet. The 401(k) administrators need to offer inexpensive\u00a0ETFs\u00a0inside their plans, and savers need to get smart about using them correctly to build appropriate portfolios.<\/p>\n

Alternatively, target-date funds should begin to rely more heavily on\u00a0ETFs\u00a0and index funds to build their models. That should bring the cost of using such automated funds down to reasonable levels in short order.<\/p>\n

It\u00a0can’t\u00a0happen fast enough for\u00a0savers, who will need every penny working for them in order to retire on time<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

It’s a recurring theme among financial advisors and the personal finance media: 401(k) savers have too many choices. They are overwhelmed. Admittedly,\u00a0most normal people are not plugged into the arcana … Read more →<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":6059,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[8],"tags":[],"yoast_head":"\nIn 401(k)s, the Problem is Fees, Not Complexity | MarketRiders.com<\/title>\n<meta name=\"description\" content=\"The 401(k) administrators need to offer ETFs with low fees inside their plans, and savers need to get smart about using them correctly.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.marketriders.com\/investing\/in-401ks-the-problem-is-fees-not-complexity\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"In 401(k)s, the Problem is Fees, Not Complexity | MarketRiders.com\" \/>\n<meta name=\"twitter:description\" content=\"The 401(k) administrators need to offer ETFs with low fees inside their plans, and savers need to get smart about using them correctly.\" \/>\n<meta name=\"twitter:image\" content=\"https:\/\/www.marketriders.com\/investing\/wp-content\/uploads\/2013\/03\/Lightmatter_zen_garden.jpg\" \/>\n<meta name=\"twitter:creator\" content=\"@marketriders\" \/>\n<meta name=\"twitter:site\" content=\"@marketriders\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"MarketRiders\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.marketriders.com\/investing\/in-401ks-the-problem-is-fees-not-complexity\/\",\"url\":\"https:\/\/www.marketriders.com\/investing\/in-401ks-the-problem-is-fees-not-complexity\/\",\"name\":\"In 401(k)s, the Problem is Fees, Not Complexity | MarketRiders.com\",\"isPartOf\":{\"@id\":\"https:\/\/www.marketriders.com\/investing\/#website\"},\"datePublished\":\"2013-03-23T18:38:05+00:00\",\"dateModified\":\"2016-12-21T15:30:42+00:00\",\"author\":{\"@id\":\"https:\/\/www.marketriders.com\/investing\/#\/schema\/person\/f2be262f5c0f3ed5ad50d6c40640ba8c\"},\"description\":\"The 401(k) administrators need to offer ETFs with low fees inside their plans, and savers need to get smart about using them correctly.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.marketriders.com\/investing\/in-401ks-the-problem-is-fees-not-complexity\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.marketriders.com\/investing\/in-401ks-the-problem-is-fees-not-complexity\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.marketriders.com\/investing\/in-401ks-the-problem-is-fees-not-complexity\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.marketriders.com\/investing\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"In 401(k)s, the Problem Is Fees, Not Complexity\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.marketriders.com\/investing\/#website\",\"url\":\"https:\/\/www.marketriders.com\/investing\/\",\"name\":\"MarketRiders.com\",\"description\":\"How To Become A Better Investor\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.marketriders.com\/investing\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.marketriders.com\/investing\/#\/schema\/person\/f2be262f5c0f3ed5ad50d6c40640ba8c\",\"name\":\"MarketRiders\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.marketriders.com\/investing\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/8e06113f594828daaf313d283544d566?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/8e06113f594828daaf313d283544d566?s=96&d=mm&r=g\",\"caption\":\"MarketRiders\"},\"sameAs\":[\"https:\/\/www.marketriders.com\"],\"url\":\"https:\/\/www.marketriders.com\/investing\/author\/support\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"In 401(k)s, the Problem is Fees, Not Complexity | MarketRiders.com","description":"The 401(k) administrators need to offer ETFs with low fees inside their plans, and savers need to get smart about using them correctly.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.marketriders.com\/investing\/in-401ks-the-problem-is-fees-not-complexity\/","twitter_card":"summary_large_image","twitter_title":"In 401(k)s, the Problem is Fees, Not Complexity | MarketRiders.com","twitter_description":"The 401(k) administrators need to offer ETFs with low fees inside their plans, and savers need to get smart about using them correctly.","twitter_image":"https:\/\/www.marketriders.com\/investing\/wp-content\/uploads\/2013\/03\/Lightmatter_zen_garden.jpg","twitter_creator":"@marketriders","twitter_site":"@marketriders","twitter_misc":{"Written by":"MarketRiders","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.marketriders.com\/investing\/in-401ks-the-problem-is-fees-not-complexity\/","url":"https:\/\/www.marketriders.com\/investing\/in-401ks-the-problem-is-fees-not-complexity\/","name":"In 401(k)s, the Problem is Fees, Not Complexity | MarketRiders.com","isPartOf":{"@id":"https:\/\/www.marketriders.com\/investing\/#website"},"datePublished":"2013-03-23T18:38:05+00:00","dateModified":"2016-12-21T15:30:42+00:00","author":{"@id":"https:\/\/www.marketriders.com\/investing\/#\/schema\/person\/f2be262f5c0f3ed5ad50d6c40640ba8c"},"description":"The 401(k) administrators need to offer ETFs with low fees inside their plans, and savers need to get smart about using them correctly.","breadcrumb":{"@id":"https:\/\/www.marketriders.com\/investing\/in-401ks-the-problem-is-fees-not-complexity\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.marketriders.com\/investing\/in-401ks-the-problem-is-fees-not-complexity\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/www.marketriders.com\/investing\/in-401ks-the-problem-is-fees-not-complexity\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.marketriders.com\/investing\/"},{"@type":"ListItem","position":2,"name":"In 401(k)s, the Problem Is Fees, Not Complexity"}]},{"@type":"WebSite","@id":"https:\/\/www.marketriders.com\/investing\/#website","url":"https:\/\/www.marketriders.com\/investing\/","name":"MarketRiders.com","description":"How To Become A Better Investor","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.marketriders.com\/investing\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.marketriders.com\/investing\/#\/schema\/person\/f2be262f5c0f3ed5ad50d6c40640ba8c","name":"MarketRiders","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.marketriders.com\/investing\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/8e06113f594828daaf313d283544d566?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/8e06113f594828daaf313d283544d566?s=96&d=mm&r=g","caption":"MarketRiders"},"sameAs":["https:\/\/www.marketriders.com"],"url":"https:\/\/www.marketriders.com\/investing\/author\/support\/"}]}},"_links":{"self":[{"href":"https:\/\/www.marketriders.com\/investing\/wp-json\/wp\/v2\/posts\/6058"}],"collection":[{"href":"https:\/\/www.marketriders.com\/investing\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.marketriders.com\/investing\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.marketriders.com\/investing\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.marketriders.com\/investing\/wp-json\/wp\/v2\/comments?post=6058"}],"version-history":[{"count":5,"href":"https:\/\/www.marketriders.com\/investing\/wp-json\/wp\/v2\/posts\/6058\/revisions"}],"predecessor-version":[{"id":11205,"href":"https:\/\/www.marketriders.com\/investing\/wp-json\/wp\/v2\/posts\/6058\/revisions\/11205"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.marketriders.com\/investing\/wp-json\/wp\/v2\/media\/6059"}],"wp:attachment":[{"href":"https:\/\/www.marketriders.com\/investing\/wp-json\/wp\/v2\/media?parent=6058"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.marketriders.com\/investing\/wp-json\/wp\/v2\/categories?post=6058"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.marketriders.com\/investing\/wp-json\/wp\/v2\/tags?post=6058"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}