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401(k) Fees Could Reduce Nest Egg By 30%

Los Angeles Times

Here's the latest scary retirement statistic.

The average American couple could pay nearly $155,000 in fees for their 401(k) plans over their careers, reducing their eventual nest eggs by more than 30%, according to a new report.

REPORT: The Retirement Savings Drain: Hidden & Excessive Costs of 401(k)s

Rather than the hypothetical $510,000 that a dual-earner couple could have at retirement with no fees, they would be left with only $355,000. The fees include explicit charges and indirect expenses, such as the cost that mutual funds incur to trade stocks.

Wealthier families could shell out nearly $278,000 in fees, according to the analysis by Demos, a nonpartisan research organization.

The mutual fund industry and some independent experts disputed the findings of the study, saying it overstated the costs that most Americans incur.

"There's a problem — I'm not quite sure the problem is as large as stated," said Mike Alfred, chief executive of BrightScope Inc., a San Diego company that analyzes retirement plans.

Still, the report pointed a spotlight at what many experts say is an enduring problem — high fees that drain the retirement prospects of millions of Americans.

Retirement-industry consultants have long complained that a variety of factors — hidden fees by 401(k) providers, lax government regulation and poor oversight by employers that sponsor retirement plans — contribute to excessive costs.

A study by the Government Accountability Office last month found that many employers did not understand the fees that 401(k) providers charge their workers.

The U.S. Labor Department will begin requiring extensive disclosure of all 401(k) charges in July. Mutual-fund firms and other 401(k) companies will have to disclose all fees to employers, and employers will have to pass that along to their workers.

Fees are one of many concerns about the risks of these plans.