The center’s report “Fixing the Drain on Retirement Savings” contends that high 401(k) plan fees are costing participants tens of thousands of dollars and forcing them to work years longer before retiring. According to the report’s authors, Jennifer Erickson and David Madland, there is a common-sense solution that will protect participants by improving retirement fee disclosure.
Picking up on the best parts of other public disclosures such as nutrition labels, cigarette warnings and Energy Star labels, a “Retirement Fund label” would be a visible box on all literature, either printed or Web-based, that offers a simple disclosure to both inform consumers about the risk of high fees and offer them a clear and comparable way to think about their fund options, according to the report.
The center offers an example of what a label may look like:
The report authors contend that one of the problems with current fee disclosures is they fail to give investors useful comparisons. To provide more relevant information about the true cost of fees, they say, disclosures should show a fund’s fees compared with similar funds that are low cost. In addition, the authors suggest, if fee disclosures are poorly accessible during the limited time many Americans spend planning for their retirement, such information will have little value.
“Every day, Americans are investing hard-earned dollars in retirement accounts that aren’t working for them,” says Erickson. “Confusing and hidden fees are eating away at their savings, forcing them to work longer and save more. It’s time to step up our nation’s consumer protections around retirement savings and ensure that workers and employers are armed with the information they need to make better choices about their investment options.”
Madland agrees, adding, “Better labeling of retirement fees is a no-brainer. At no cost to taxpayers, we can save workers a lot of money and make it much more likely that they can retire.”The Center for American Progress is an independent nonpartisan educational institute dedicated to improving the lives of Americans through progressive ideas and action. It covers such topics as energy, national security, economic growth and opportunity, immigration, education, and health care.