Posted by D. Cupples | Apparently, 401(k) managers aren't clearly communicating their fees up front. A recent GAO report states that 40+ million Americans have 401(k) plans, whose fees "may significantly decrease retirement account balances."
According to a survey, 83% of 401(k) participants don't know how much they'll pay in fees -- and 65% thought they wouldn't pay any fees (report, p. 5).
Don't we have a right to know how much our investments will cost us?
Managers know how much they intend to charge. Yet, when left to their own devices, they've opted to obscure their fees. How can we change this? Through better laws. This may irritate people who oppose regulation on "principle," but given that managers aren't voluntarily disclosing fees, what else do we have?
A different GAO report pointed out this problem in November 2006. A year has passed: why aren't better laws already in place?
The GAO urges managers to explain their fees using a brief document, clear language, and a straightforward layout. Given computer technology, they should already be doing this.
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