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Follow the Money on 401(k) Fee Disclosures

Greg Carpenter

January 25, 2023


I recently read a story on titled, “401(k) Disclosures Not Working For Investors.” The article made the point that participant fee disclosures are at best confusing, and at worst, completely ignored.

Friends, it should come as no surprise that I am in favor of more 401(k) fee disclosures, presented with total clarity. As I have blogged about many times in the past, hidden fees eat away at retirement savings. And these disclosures have got to be crystal clear. All the information in the world won’t help you if it’s written in a language you don’t understand. Are we getting either with the current fee disclosure regs?

No. Here’s why -

Joshua Itzoe, a Certified Financial Planner (full disclosure: Employee Fiduciary has common clients), was interviewed for the story. Here’s an excerpt:

The fee disclosure forms are "the retirement industry's version of Y2K," according to Itzoe. "The anticipated impact was much more than what actually came to pass. I don't think the forms worked as anticipated."

Itzoe is particularly disappointed that fees are expressed as a dollar figure for every $1,000 invested. That means participants must perform various calculations to arrive at their total fees from a percentage standpoint, he says.

"That's the best we can do for people?" he asks. "How many people actually did that work?"

If 401(k) fee disclosures aren’t working for plan participants OR financial advisors...who exactly are they working FOR?

Answer: follow the money. The winners are those who continue to receive high fees. To turn the old Lending Tree mantra on its head: When investment managers obfuscate, you lose.

The frustrating thing is that we can call them out. Being frugal means having a healthy level of skepticism. Unless you know you are getting a good deal on your investments, I would argue that you are not. Ask the questions - just because the disclosure is compliant does not mean that we must be complacent!

Check out this piece that aired today on NPR. Uri Berliner works his way through an investment choice. Great basic information. His choice - low cost passive investments. It’s well worth the listen as several experts guide him through the process. Uri and the Planet Money team do a great job of taking complex financial concepts and make them understandable.

Raising a little heck is a very frugal thing to do.

Have a thought you want to share about 401(k) fee disclosures or the Berliner segment mentioned above? Drop it in the comment box and let’s talk.

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