SURVEY SAYS: Evaluating Retirement Account Fees

April 29, 2013 (PLANSPONSOR.com) - Although the FRONTLINE documentary that aired last week received criticism for being an inaccurate picture of the retirement account industry, it IS a good idea for folks to know what they’re paying.
By PS

I asked NewsDash readers, have YOU evaluated the fees for your retirement accounts?  

Nearly 41% of responding readers indicated they evaluate the fees for all of their retirement accounts regularly, while 25.8% said they have evaluated their retirement accounts’ fees recently. Twelve percent reported they have evaluated the fees for some of their retirement accounts, but not others, 10.6% have evaluated the fees for all their retirement accounts, but it was a long time ago, and 10.6% said they never have evaluated fees.  

In the verbatim comments, several readers took the opportunity to air their views about the FRONTLINE documentary. Several pointed out that fees are only part of the retirement savings equation. Editor’s Choice goes to the reader who said: “I thought it was telling that Frontline correspondent Martin Smith, who runs his own business, and thus is either the plan fiduciary (or likely hired whoever is) was so stupefied about his own plan’s menu. Maybe he and Asst Sec of Labor Borzi should have a chat about HIS fiduciary responsibilities!”

Verbatim   

I did look at the fee information I received and the effect of the fees on my account. However, our plan only has 8 funds to choose from so if we want to put together a diversified portfolio, we don't have much choice with regard to the fees. Your article did concern me with regard to the "trade fees" and "other participant fees" mentioned. The only fee info we got was on fund mgt fees - I'm now wondering if there are other undisclosed fees hitting my account. 

 

The documentary painted a rosy picture from the 1960's and 1970's about people simply retiring with a DB benefit, payable for life. Sad that those days are gone. Even ignoring all the other problems with DC plans, especially investment risk, is anybody even listening to the words "evaluating retirement account fees" and then thinking about what the average person knows about any of this. I've seen surveys saying a significant percentage of the population does not even know Mexico is the country that touches the US southern border. And this is the same population that is going to evaluate retirement account fees? The system is absurd. 

 

With the direction and support of professional plan investment advisor several years ago. Initially he was able to reduce our fees significantly and again with a change in recordkeeper. It has made an impact the employees' investment returns. One Committee Member said "hiring him [the investment advisor] was the best decision we have made! (Yes, it was my recommendation to the Committee.) 

 

People should primarily be concerned with participating in a retirement plan and contributing adequately for their retirement. The program may have distorted some facts but it brought needed attention to the general issues that plague employees - will people be able to retire adequately on their own terms? 

 

I'm a firm believer in index funds, in part because of their lower fees, but also because it makes more sense to me to accept the market return than to waste a lot of money trying to consistently beat it. 

 

I see the fees disclosed. I see fees taken out once a year on one of my accounts but I don't know the long term effects on my balance. Criminal if I'm only left with 1/3 like Frontline reported. 

 

We aim to achieve a balance between the lowest fees for the most services. We also did a workshop on how fees in our plan work last fall and continue to take opportunities to educate team members on this topic. 

 

I guess I'm the only worker in America who actually read and used the package of fee disclosure material I received to evaluate my account. I am satisfied I'm receiving appropriate value for what I'm paying. 

 

Total return of the retirement accounts is the most important factor, although reasonable investment fees is also important. 

 

you get what you pay for 

 

All of our fees our low - none more than 81 basis points, many around 50. We have 43 plan options. Just change Fidelity Freedom Funds from standard to "K" shares, lowering the cost even more. 

 

The fees are important, but should not be the driver in evaluation. Asset allocation is paramount. Second is allocation of savings with different tax strategies, depending on the individual needs. Only then do fees enter the equation.

Verbatim (cont.)  

We decided to move to mainly indexed funds after determining that our participants had been paying high fees for actively managed offerings and the returns didn't warrant those fees. 

 

While important to evaluate, it should not be the only deciding factor in what to invest in. 

 

Not only for my own, but for the 401(k) we sponsor. We have known for years every cent we pay and we never ignore the question. As your article pointed out, fees should never be the most important point in the decision making process when choosing investments, but they should always be one part of the equation. 

 

No time to do this for myself; too busy sending out fee disclosure notices and dealing with various other notices/compliance requirements of the government for benefits. 

 

I haven't looked at the fees charged by my 401(k), but I'm going to! 

 

Did it regularly even before all the recent regs and attention. Helped us quickly win a fee lawsuit a few years ago. 

 

As a participant - quite honestly - what good would it do? I have far more important things which I CAN impact in my life to worry about.... 

 

We reduced fees significantly when we made a change in our Investment Advisory group. The new group analyzes and reviews all fees every three years. 

 

Guess there's now three things we can't avoid; death-taxes-(management) fees. It's probably fair to say, with relative confidence, one of them is accountable. 

 

I never cease to be amazed at the stupidity of some people, and the ability of NPR to find them (I won't argue there's a connection, but...). Here you have a group of people, most of whom have clearly made some bad financial decisions, and yet - even those who lost a lot of money in their 401(k)s - are still living off them in times of hurt/pain (Martin Smith would appear to be the poster child for such things - wonder if he's aware that as the owner of his business HE'S probably responsible, directly or indirectly, for that fund menu he was so puzzled by). I wonder how many people will decide not to save for retirement because of that silly show? How about a program on "the really big retirement gamble" that focuses on the folks that haven't saved anything? Or who had the chance to do so at work and decided not to? The 401(k) industry needs some better spokespeople - there's no helping the filtering of comment editing, but it was...embarrassing. And, frankly, the comments in the article in newsdash this morning were just about as bad. How ironic that Hiltonsmith made the most compelling counter-argument, pointing out (in the PlanSponsor article) that John Bogle's example, while mathematically accurate, wasn't based on real data. Not that Hilltonsmith was willing to be so honest in that report he published last year, when he was perfectly willing to make up a conclusion based on an assumption that trading fees were equal to the stated expense ratios. Maybe he HAS learned something along the way.... and maybe we all can, despite the hyperbole and mischaracterizations of that Frontline piece. 

 

I thought it was telling that Frontline correspondent Martin Smith, who runs his own business, and thus is either the plan fiduciary (or likely hired whoever is) was so stupefied about his own plan's menu. Maybe he and Asst Sec of Labor Borzi should have a chat about HIS fiduciary responsibilities! 

 

NOTE: Responses reflect the opinions of individual readers and not the stance of Asset International or its affiliates.

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