high fees eroding many 401(k) retirement accounts

[xchrom]

http://hosted.ap.org/dynamic/stories/U/US_401K_FEES_SILENT_ENEMY?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2014-04-12-09-43-53

WASHINGTON (AP) -- It's the silent enemy in our retirement accounts: High fees.

And now a new study finds that the typical 401(k) fees - adding up to a modest-sounding 1 percent a year - would erase $70,000 from an average worker's account over a four-decade career compared with lower-cost options. To compensate for the higher fees, someone would have to work an extra three years before retiring.

The study comes from the Center for American Progress, a liberal think tank. Its analysis, backed by industry and government data, suggests that U.S. workers, already struggling to save enough for retirement, are being further held back by fund costs.

"The corrosive effect of high fees in many of these retirement accounts forces many Americans to work years longer than necessary or than planned," the report, being released Friday, concludes.

[edhopper]

1. The 401K scam

was just a way to get workers to play in the casino. And we know the House always wins.

[brooklynite]

2. Complain all you want about the fee structure...

...but responsible investments in the market over the long term is not a bad way to invest assets.

[edhopper]

3. The problem was the 401K

was brought out to replace pensions and it has done an abysmal job of helping people have enough for retirement. It benefited the Wall Street elite much more than the workers.

[lostincalifornia]

6. Some of that has changed in the last decade. Many companies now allow self-directed 401Ks, where

people can not only by individual stocks, but they can buy funds also, and are not obligated to a set of 401K plan funds with high fees, sometimes up to 2%

[edhopper]

9. The whole 401K experiment to replace pensions

is a failure.
it's not that a 401k as a supplemental savings for those who can afford to put the money aside is a bad thing. But as wages have stagnated over the last 30 years, having any amount of meaningful money to set aside has become harder and harder. The guaranteed income of a pension has been replaced with the crap shoot of the 401K. And with the current war on savings, gambling in the stock market is the only way to hope for any return, or loose it all in the next crash.

[lostincalifornia]

12. Pensions are not coming back. Incidentally

Ask the folks who worked for the airlines and other industries how those pensions worked out for them when their companies went under?

Yes , they should have been protected , but they weren't and got pennies on the dollar

People who work are saving for retirement, and I would venture a good set of folks who don't have an Ira or 401k could find a way to save a small amount each month.

Yes there are many who really can't afford it, but most of those folks are not even offered a 401k option, and really can't afford to save, which is why social security is vital

Long term investment in high quality stocks and bonds through mutual funds or individual issues has always worked out for long term investors

If they do not want stocks then they can always can save their 401ks in government bonds and avoid the risk of the stock market.

[edhopper]

13. The ongoing war

on the working class.
Brought to you by Ronny Reagan and his right wing Oligarchy.

Pensions aren't coming back anytime soon, but neither are voting rights, gun laws or access to abortion.

Mores the pity. Doesn't mean that the 40K as a replacement for pensions isn't a failure.

[TheKentuckian]

14. The investors club is never going to admit the truth that most even with a 401k are not going to

have enough to retire on and that Social Security will be half or more of their income.

Why?

Well, partially they wish to allow Social Security to be looted or privatized and partially because any other set up risks an I creased burden on the "upwardly mobile", the upper class, and the wealthy and they would rather millions eat shot and die than for that to happen.
This is also why they love the Wealthcare and Profit Protection Act, which guarantees market access and limits liability for them while maintaining the fee for services scale which will consistently but them on the hook for a smaller share of income than the average person, this is cheaper than universal care for the well off by a lot and they intend to keep it that way as they intend to keep cap on Social Security as low as possible.

These people are our class enemies as surely as the open right wing even if they aren't race, gender, or orientation bigots or how wonderfully pro - choice they are or how many checks they write to influence Democrats to serve their interests under cover of "protections for the poorest of the poor" and phony pragmatism.

[lostincalifornia]

16. Any Democrat who signs on to privatizing social security or Medicare will never have my support,

In an election or else where. As you said that is a direct attack on on members of the society except the very wealthy

I agree with you those folks would be our enemies, no matter what party they represent

[lostincalifornia]

15. No argument from me on your assessment

[SheilaT]

26. You are absolutely right.

And already certain states and municipalities are trying very hard to not pay promised pensions to their retirees.

At least some of the people who complain they can't possibly retire never saved a penny, and I'm not talking about those who never earned much more than minimum wage, but people with decent incomes who simply spent every dollar they earned.

I count myself fortunate that I was an obsessive saver for many years.

[lostincalifornia]

27. Unfortunately a lot of folks who could saved never learned to

[SheilaT]

29. Another thing that simply isn't recognized is that

a good guaranteed pension was only something a minority of workers actually got. There were various restrictions on them, and they weren't portable, so if you changed jobs before being vested, which was typically ten years, you were screwed.

And sometimes the unions were the worst. They'd have requirements such as working for thirty years for the same local, and then would arbitrarily move someone to a different local after twenty-nine and a half years.

401k plans, and their sibling 403 b plans (for non-profit) as very good if used wisely. But too many don't put any money in, or worse yet, as one co-worker recently told me, they borrow money from it. Never a good idea.

[lostincalifornia]

34. Absolutely right I worked for a company for 9 years, and lost my entire pension with them by 6

Months when they closed the division I was working at. Luckily I was investing in IRAs

[edhopper]

36. The law says you are vested after 5 years

there is no 30 year rule. The pension is then based on the years you worked.

[SheilaT]

41. Now it's 5 years, and has been for

quite a while. But back when I entered the labor force it was almost always ten years. I'm old.

The stories about unions and 30 years for a pension likewise goes back a long time. But those things did happen.

When I went to work for an airline in 1969 at the age of 20, you had to be at least twenty-five years old and have been with the company for two years to start to participate in the pension plan. A year or so later they actually changed the rules, making them better: no minimum age, could participate from day one. And they went from requiring a paycheck reduction to making the entire contribution themselves. But it was still a ten year vesting time. The change to five years happened around 1979, if I recall correctly.

I wound up working for ten and a half years. Today I get a very small pension, $172.31/month. It's better than nothing, but social security is a vastly better deal. And I've got savings and investments which are helping.

[edhopper]

42. Pensions should supplement Social Security

I am claiming they are better than 401Ks, which is not an option for many.
401Ks were sold as a way to help workers get a better retirement, but it is just another con job by the elite.
I wish this country would move in the direction of benefiting workers instead of waging war on them. Right now, I don't think staying in the same place and not backsliding into 19th Century work era is an option.

[hughee99]

20. Ah yes, the "guaranteed income of a pension" doesn't seem to be much better than the crap shoot

of a 401k.

http://www.democraticunderground.com/11174815

[edhopper]

22. Well the dissolution of Unions

who had pensions separate from the companies is part of the war on workers.

In Europe pensions are universal and guaranteed.

[hughee99]

23. And they've never been this way in the US.

You made it sound like the old pension system was guaranteed money and the 401k came to fuck it all up. The war on workers came along to screw workers out of their money whether it was 401k or pension, the difference is, with a 401k, you're not at the mercy of someone else telling you "Thank you for paying in all these years, and we still have some money left in the account, but you're not going to get almost any of it." I guess there's really not much of a difference between someone screwing you a little each year as opposed to someone screwing you all at once in the end, though.

[edhopper]

25. I know quite a few people who have a good Union pension

as opposed to those with a company pension who have been Enroned.
Of course the government oversight could easily insure that there was enough put in to cover the workers, but our elite serving leaders don't take the side of the workers over Wall Street in any meaningful way, so they allow underfunding and pillaging of pensions.

The 401 K is a failed experiment pure and simple, most do not have enough to retire on.

[Lurker Deluxe]

50. I know a couple of people as well

I know of three people who have pensions that allow them to live comfortably in retirement.

I know lots ... as in over 30 ... who have kick ass 401K plans that will allow them to live very well in retirement. I'm one of them, my company gives a 7% match and I contribute a good chunk of change to my plan.

401K is not failed. Most never have enough to retire ... not like this is something new.

You are talking like before 1978 everyone was retiring with full pensions ... which just is not true. Pensions that paid enough to live comfortably were rare, even today outside the public sector they are rare. And the people who do have them are seeing them destroyed by lack of funding.

I'll keep my 401K, thank you very much.

[lostincalifornia]

28. It should have never happened, but it did

[yeoman6987]

30. I think 401K is safer then pensions now aday

So many pension funds are unfunded. I don't know how states are going to be able to pay them. The only people that may end up getting a pension when it is all said and done is the post office workers since they are required by law to put money aside for pensions. Too bad all companies and government entities don't do that.

[edhopper]

32. So you think the rigged casino that is the Stock market is safe?

not to mention how many people simply can't afford to put much if anything into the 401K. Send your kid to college and keep a house over your head or put aside money for retirement, which would you choose/ And while Obamacare is a positive thing, it does represent an added expense for a lot of people, an money that doesn't go into savings.

It is not a replacement for pensions. That the corporatist government has allowed pensions to be mismanaged and plundered is not a failure of pensions, it is a failure of leadership. (or in the case of the Republicans, a success.)

The 401K is a piss poor retirement strategy for this country. a failed strategy.

http://www.dailymail.co.uk/news/article-2458627/Nearly-50-percent-older-Americans-having-delay-retirement-80-percent-say-work-turn-65.html

[Yo_Mama_Been_Loggin]

43. It's only rigged if you want to make a quick killing

like a so called day trader.

If you save over the long term it tends to work in your favor. I've been investing in the stock market for 30 years now. I don't like to talk about it much but my net worth is just over a million.

Of course if you met me you wouldn't know since I tend to live pretty frugally.

[Major Nikon]

45. There's no way I could retire as well with a pension in lieu of a 401k

I still have a few years to go, but my retirement income will be more than my best year on the job. The very best pensions rarely paid more than a 30% annuity with zero legacy to your heirs. I don't miss pensions.

[yeoman6987]

48. Your post I agree with

but it does not answer the question about what to do about it. You deal with the hand you were dealt. I think people in 401K have a better chance at having money at the end of the day then people with pensions due to states and cities running out of money. It was darn close that Detroit was going to stop pensions. Will it happen next time? Very possible. The safest pension is the post office.

[lostincalifornia]

7. Actually it wasn't free before. A lot of company 401K fees were charging up to 2% on their company

401K funds which was the only choice the employee had.

A lot of companies are now allowing self-directed 401Ks, where you are NOT forced into a set of funds mandated by the particular 401K plan.

Problem was, a lot of folks in the past could only buy a set of funds associated with their particular 401K plan, and in many cases the funds were mediocre at best, with high fees, and in some cases even loaded.

[Orrex]

8. It's a terrific investment vehicle

for the employer, because it dumps 100% of the risk on the employee. Sure, a diversified portfolio will be protected over the long run blah blah blah. But diversification slows growth, and the average citizen simply lacks the time, knowledge, skill and resources to plot a responsible investment strategy.

The 401k has been a scam since its inception and a huge money-maker for employers that offer it.

[lostincalifornia]

33. There is no law that ever said an employer has to offer a pension or a 401k. For those that don't

Know investments they can buy an s&p 500 stock fund, and if they can afford it, the money they put in today will be worth more in 30 years. The stock market will average very conservatively about 5 to 7% per year, and on those years when the market drops, over the 30 year span you will still have a net gain.

You don't subscribe to that, then don't participate. The 401 k is not a huge money maker for corporations. In fact those companies that offer 401ks usually have matching plans.

Pensions are a thing of the past, and small companies never offered pensions in the first place, but some did offer 401ks.

Regardless, no one is forced into a 401k, but that doesn't stop them from saving or investing in an IRA, and that is not happening either

[Orrex]

39. Yeah! Shame on the paycheck-to-paycheck crowd for not investing $2000 per year!

I'll bet that they all have color TVs, too.

[lostincalifornia]

40. Obviously you didn't comprehend what said. " for those that can afford it". Also, in my other post

In this thread I specifically said that a large amount of people cannot afford to save or an IRA, and thank god for social security.

But thanks for distorting what I said.

Also, I was responding to your specific comment that companies were making tremendous money on 401ks, which is false. Also on your comment that people do not know how to invest, which does have some validity

What you have done is bring up an entirely different topic which was NOT what I was discussing with you

The working poor, or those that cannot afford to save, that is an entirely different point

Thanks for changing what you originally posted to me, and responding as though I was attacking the working poor

NOT TRUE!!!

[BlueStreak]

10. One does the best one can, but the game is rigged

Many of the 401Ks have outrageous fees. And on the investment side, the market has been overtaken by high frequency transactions that have the effect of siphoning off a HUGE proportion of the gains before the scaps can ever trickle down to the 401K holder.

We have a broken system that needs to be fixed.

Read this article http://www.nytimes.com/2014/04/20/books/review/flash-boys-by-michael-lewis.html?_r=0

And then get the book (Flash Boys)

[kelliekat44]

24. More ways the capitalists rob the working class. nt

[lostincalifornia]

4. Actually more and more companies are allowing self-directed 401Ks.

[pipoman]

5. Depends on the administrator

Mine is managed by a non profit which charges 1% then returns any money not needed to administer the accounts annually. The performance has been pretty good. The biggest problem is the volatility of the market.

[Omaha Steve]

11. K & R!

[badtoworse]

17. You need to look at returns net of fees when evaluating funds

High fees will add up top a lot of money over decades, so it does pay to look at a fund's fee structure and what it's historical returns have been after accounting for fees. I've been partial to Vanguard funds because I believe their fees tend to be lower than average and the returns on the funds I've selected have been good.

I have used Morningstar Fund Investor for many years as a source for data on funds. It costs around $100 per year to subscribe, but it's money well spent if you are serious about fund investing.

[lostincalifornia]

35. They are among the lowest in the field. You are right

[BeyondGeography]

51. Their founder (John Bogle) is one of the good guys

when it comes to protecting the small investor from fees. He's over 80 now but the culture he developed is still there.

[backwoodsbob]

18. my fees are .75

I have gotten an average 8% over ten years.

I'm ready to pull it even with the penalties....I will move back to Charleston SC and buy a nice house paying cash and likely still have over 50k left

[TheKentuckian]

19. You will be very Social Security dependent. House buying money plus 50th is not

close to enough.

401k is a piece not the puzzle.

[Lurker Deluxe]

21. Uhhh

If you are averaging 8% why would you pull it and pay cash for something you can finance for 4%??

You'll make 4% on the money if you leave it there and finance the house, plus the income tax hit and penalty for early withdrawal.

I guess then you will say you got screwed by the 401K because it cost you so much to do something no one with any financial savvy would even consider.

FFS!

[lostincalifornia]

38. Exactly. 10% penalty, income tax on a large lump sum, why. The money could be rolled over into an

IRA, and if it is a first house, 10% could be used from the rollover IRA and used for a down payment on the house. There are a lot a strategies that can be used, but withdrawing from a 401k and paying the 10% penalty is not a prudent one

[Warpy]

31. That's exactly what happened when Pinochet tried it in Chile

For a few years, it almost looked like it might work and then the fees started to pile up. Most people ended up with a pittance and are now on the dole.

[edhopper]

37. One other thing that comes to mind

the last vestiges of workers with pensions is the public sector, it was one of the reasons to choose a life in public service, since advancement is limited.
But now, after the Repugs have crushed the workers in the private sector, they turn to the public and say, why should they get what your not.
It should be why doesn't everyone else get whats fair and needed.
But it's a war on workers and very few in power want to acknowledge it.

[B Calm]

44. and republicans want to privatize social security. .

[DirkGently]

46. ... and they don't want SS to compete with that.

The whole Fix the Debt scam is a bunch of investment bankers trying to swindle their way into a few more of those fees.

[sailfla]

47. really not sure what to do

My financial adviser wants us to put all our money in our account with him.
Raymond James. WE are at retirement age and I think we have enough to live pretty well. I know how much they make on our account.Really struggling with these fees.

[B Calm]

49. Ask him about income funds. I retired a year ago

and get a monthly check from Morgan Stanley. Even though I draw a monthly retirement check from my savings, my savings are worth more today than a year ago back when I first retired.