Most surveys that poll 401(k) participants have “no idea” if their investments are “good, bad, or ugly.” And, when you are planning for retirement, you want to know that the funds you are investing are generating wealth and not just sucking money out of your account due to hidden or overpriced fees. 

“Sixty percent of people don’t know they’re paying any fees at all in their 401(k) plan,” says Laurie Rowley, president of the National Association of Retirement Plan Participants.

So, how can people get their investment portfolios to work more for them; getting on the right road to retirement?

Eliminate Overpriced Funds

“Fees make a huge, dramatic impact on your total savings nest egg,” Rowley says. As soon as people become aware that they are paying for these services, they need to find out how much they are paying in fees. Investment accounts are not free. 

Rowley says that a 2% fee sounds small, but it can consume up to half of your potential retirement fund over 35 years of investing. 

We recommend finding low-cost funds to invest in that do well to track market performance. 

If you invest $10,000, and that investment makes a 7% return every year. After 40 years, that investment would be worth $149,745. But if it charges a 2% annual fee, after 40 years, your investment would only be worth $70,400 — a missed opportunity of $79,345.

Buy Low

Ian Ayres, a Yale law professor has studied thousands of 401(k) plans across the country. He says, “Many plans offer funds that no reasonable person should invest in,” and considers these options “booby traps,” which look enticing but are nothing more than creative ways for financial firms to make more money. 

“You can definitely get zonked in a bunch of these plans,” says Ayres. “These are rip-off funds.” He recommends staying away from any funds that charge “over 1% a year,” and sticking with options that are below 0.5%. 

Ayres says that’s how you build up your nest egg. 

In a Pickle? 

You have the right to know how much you are being charged in your 401(k) plan. By law, plan providers must disclose fee information to participants, including “expense ratios.” 

So, what do you do if your plan looks expensive? Ayres says complain about it. Companies don’t often make a change until employees ask for it — it’s the ol’ adage, “the squeaky wheel gets the grease.”

And, if you are looking for a new plan, contact SaveDay; where investments grow freely!

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