Could You Be Getting Higher Returns on Your 401(k)?
Once you get your hard-earned dollars into your 401(k), it’s painful to think they might not begetting you the highest return possible. Before you go any further, those who aren’t contributing regularly to a 401(k) or another type of tax-advantaged retirement account, such as a Traditional or Roth IRA, need to start now. While making that 10 or 15 percent contribution from your paycheck can be tough, there’s no excuse to not plan for supporting yourself in your old age.
• The funds you select in your 401(k) plan could be charging you sky-high fees. You probably know the money you’re putting away in a 401(k) doesn’t get managed for free. Not only are there fees associated with the plan itself, which can either be borne entirely by your employer or partially passed on to you, but the funds your 401(k) is invested in each charge a certain amount as well. Over a lifetime, 401(k)-related fees could cost a median-income, two-earner household about $155,000—or almost a third of their total investment returns—according to a projection by think tank Demos. To minimize the hit fees are taking on your savings, look for funds with a low expense ratio. A lower expense ratio translates to a lower cost to investors. Research the expense ratios of funds in the prospectus (the in-depth document that discloses fund’s financials.)
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