personal finance

On 401(k)s, fees really do matter

Fees can greatly affect the bottom line of your retirement plan — and how much leisure time you will have.
Lara Cerri/Tampa Bay Times
Fees can greatly affect the bottom line of your retirement plan — and how much leisure time you will have.

WASHINGTON — You may not believe it, but there really are government forces trying to help you become better informed about your workplace retirement plan.

I wonder if their efforts are in vain.

The Department of Labor is moving ahead with a proposal for transparency, opening a 90-day comment period to collect opinions on a proposed guide to help employers find fee information in disclosures they get from the investment companies that manage their 401(k)-type retirement plans.


The department felt it needed to step in because companies were having a hard time locating the required fee information, which often was buried in legalese and multiple documents, said Phyllis C. Borzi, assistant labor secretary for employee benefits security.

Get Talking Points in your inbox:
An afternoon recap of the day’s most important business news, delivered weekdays.
Thank you for signing up! Sign up for more newsletters here

Call the guide a road map, Borzi said during a media conference call.

After watching what was being sent, Borzi said the department became “particularly concerned some employers, especially small employers, may not be reaping the full benefit of fee disclosure regulation.”

Like a GPS device calling out turn-by-turn directions, the guide would direct employers to a specific page or section to easily find fee information.

Why does this matter to you?


Because your employer has a fiduciary responsibility to act in your best interest regarding your workplace plan. To this end, your employer also has an obligation to watch the fees and expenses and to make sure they are reasonable.

Folks, this guide directly affects you.

The more your employer understands what you are being charged to invest your retirement funds, the more likely the company may negotiate a better deal so that your fees come down. And fees influence what you ultimately end up with in your retirement account.

Fee and expense disclosures were mandated two years ago. You are supposed to receive detailed information about the fees you pay.

Many people don’t realize they are paying fees.


The LIMRA LOMA Secure Retirement Institute looked at the issue before and after the new fee disclosure rule. The research company found that nearly four in 10 retirement plan participants — despite receiving notices about fees — still did not know they were paying fees or expenses.

Before the fee-disclosure rule, 50 percent of retirement plan participants did not know how much they paid in fees and expenses.

Such expenses, which are passed on to plan participants, can vary. Bundled in what you pay are expenses for legal, accounting, and record-keeping services. You might be paying for access to customer service help or certain software.

Funds that are actively managed might incur higher fees.

If you work for a small company, your plan’s fees and expenses might be higher.

And those fees can hurt your bottom line. Here’s an example provided by the Labor Department:

Let’s assume you have 35 years until retirement and a current 401(k) account balance of $25,000. You stop contributing, leaving the account at $25,000.

Over 35 years, your account averages a 7 percent return and grows to about $227,000 at retirement. In this example, fees reduce the average returns by 0.5 percent.

But what if your fees were 1.5 percent?

You would end up with $163,000. That difference of one percentage point reduces your account balance at retirement by 28 percent.

You may not want to take the time to weigh in on Labor’s plan to require a guide to help employers. But at least make all the effort for transparency pay off. Open your retirement account statements. And when you do, spend more than five minutes checking them out.

If you’re not sure that you’re getting a good deal, go to, which provides retirement plan ratings and research. You can enter the name of a plan and get measures to help you determine whether the fees are reasonable and how they compare to those at similar companies.

“When workers save for retirement and play by the rules, they have a right to expect that their savings are not being diminished by excessive fees or conflicts of interest,” said Labor Secretary Thomas Perez.

Ultimately, the proposed rule could help employers agitate for lower fees by making them better informed.

The result could be more money to spend in your retirement years.

Michelle Singletary can be reached at