It's no small irony that you can get a load of price information on homes, cars. appliances and just about any consumer product simply by opening the browser on your computer or mobile device.
But how can you check how much your 401(k) really costs?
After all, you only get to invest the amount of money left over after all fund and middlemen expenses are subtracted from your account -- and they can be considerable.
There are some key questions you should be asking when crunching your 401(k) numbers.
* Does your employee cover all or some of plan costs?
According to the 401(k) service FeeX, the company has found that "many employers cover all additional plan fees themselves (fees occurring outside of what would be included in a fund’s expense ratio)."
In other words, what's your "net contribution" after fees (that you have to pay) are deducted from your contribution?
* What are the hidden fees?
You may not know, for example, how much a fund is charging you for transactions -- buying or selling securities. How much does it eat into your nest egg? You need a number
FeeX found that "each 401k plan has different individual fees and expenses, these can range from nothing to in excess of 2.75% annually. Study and review yours." Check how much plans cost outside of your plan. They should cost much less inside the plan. You shouldn't pay "retail." Make sure your funds don't charge you more than 0.20% annually in expenses.
* How do you know if your plan's funds are dogs or darlings in terms of performance?
"First, check whether the expense ratios of the funds in your plan’s past returns are higher than its benchmark fund’s past returns.
When selecting funds for your 401k, remember that higher fees do not mean better returns (the opposite is usually true). Over the past 20 years, the percentage of active funds that underperformed their benchmarks was close to 75%."
Low-cost index funds should solve the problem of having overpriced funds in your plan.
By the way, I'm not just suggesting you crunch fees just on your 401(k) plan. Look at your individual retirement accounts, SEP-IRAs, SIMPLES and other small retirement plans.
The great part is that you don't need to do the math to see how much high fees are costing you. You can use online fee calculators to see how much expenses eat away at your nest egg over time. Companies like FutureAdvisor offer free online fee analyzers.
Expenses add up. Even small fees devour your savings over time. A 0.59% annual expense can cost you $200,000 over 20 years at 8% return, according to Personal Capital's Fee Analyzer.
That's the cost of a private college over four years (at $50,000 a year).
Also check out BrightScope to see how your plan compares to plans of similar size.
By comparison shopping retirement plans, your goal is to find the best deal and to tell your employer about it. It's akin to finding a bargain in a car, only you can drive your 401(k) much longer -- if you crunch the numbers.
