KANSAS CITY, Mo. - You put a little away every week or two hoping it'll be there when it's time to retire. But do you know how much of your 401K is going to fees?
If you're like most people you have no clue how much you're losing.
Dave Lutzow is an architect who designs school buildings in Hinsdale, Ill. He employees 42 people. people he likes to think of as family.
But the hole he is talking about is a financial one the result of years of paying sky-high fees for his and his employees retirement plan.
"We're talking tens of thousands of dollars in that program and if you multiply it times the entire staff, I mean conceivably it could be $100,000 and $200,000 thousand and that's significant dollars," he said.
It was a cost that Lutzow never saw in his statements and a number his investment advisors repeatedly refused to provide.
"There were several times where I said point blank, 'what are your fees?’ and ‘oh don't worry about it. It's all in the plan. It's all rolled in,’" he said.
And Lutzow is not the only one who's in the dark. In a Government Accountability Office study, 83 percent of respondents didn't know how much in 401(k) fees they were paying. More telling, 65 percent of respondents didn't think they were paying anything all.
In this case, ignorance is not bliss.
David Loeper is a financial advisor and author.
"I'd estimate that probably 90 percent of all 401(k) participants are probably getting ripped off in their 401(k) plan to the tune of excessive fees," he said.
The fees sound small, but Lutzow eventually determined that he and his employees were paying 3 percent, and those small charges add up.
What does all this mean? A 45-year-old worker has $20,000 in a 401(k) plan. If he paid reasonable fees of one-half percent by age 65, his 401(k) will have $70,000 in it. But take the same worker who has fees totaling one percent and the number drops significantly to just $58,000.
