Yet Another Reason ETFs Should Be In 401(k) Plans
January 7th at 12:00pm by Tom Lydon
Investors have been pleading for exchange traded funds (ETFs) to be available in 401(k) retirement plans for quite some time now. Some feel like they are getting burned with hidden fees found in many traditional mutual fund-based plans.
Laura Rowley for Yahoo Finance adds fuel to the fire by reporting that members of Congress, the Department of Labor and financial experts have officially found that some companies managing 401(k) plans are siphoning off billions in excessive fees. These fees are "bundled services" that are taken before returns are reported, and are either overlooked or not disclosed at all.
The average fee charged to a plan is 1% of assets managed, and they can range as high as 2.25%. Those fees can really put a dent in a retiree’s budget and hurt a population of people who need food and medicine.
The Fortune 500 companies are under scrutiny right now, but the smaller businesses with fewer than 100 employees are actually hit the hardest. They lack economies of scale and are paying higher fees because the plan is smaller. By incorporating ETFs into these 401(k) plans, many of these fees wouldn’t be an issue.
