Three-Quarters of Americans Are in the Dark When it Comes to 401(k) Fees
January 29 2018 - 8:30AM
Business Wire
TD Ameritrade’s free 401(k) fee analyzer tool
powered by FeeX shines a light on fees
An eye-opening new TD Ameritrade survey of 1,000 investors shows
that 96 percent of people know how much they pay each month for
streaming media services like Netflix, Hulu and Spotify and yet
just 27 percent know how much they’re paying in fees on their
401(k) accounts. The vast majority either may mistakenly believe
they don’t pay any 401(k) fees (37 percent), don’t know if their
plan has fees (22 percent), or don’t know how to determine the fees
(14 percent). The hard truth? 401(k) plans aren’t free; about 95
percent of 401(k) participants are paying administrative and other
fees in addition to fund fees.1
“While often overlooked, fees can put a drag on investment
performance and impact portfolio value over the long term,” says
Matthew Sadowsky, director of retirement and annuities at TD
Ameritrade. Not only do the funds inside of a 401(k) plan charge
ongoing fees, but there is also an overall cost to administer the
plan. Many employers pass some, or all, of those costs on to plan
participants. Sadowsky adds, “It can be onerous to read through all
the disclosure information and documentation to understand the
fees, but just because it’s hard to decipher doesn’t mean those
fees don’t exist.”
Since 401(k)s are a cornerstone of American retirement savings,
with their tax advantages and other benefits, employees should
continue to take advantage of 401(k)s to their fullest while
becoming more aware and empowered about their accounts. That’s why
TD Ameritrade has teamed with FeeX, Inc., a fintech pioneer in fee
transparency, to help retirement savers quickly analyze their
401(k) fees.
“This is a first,” Sadowsky says. “We believe TD Ameritrade is
the first financial services company to provide 401(k) owners with
such transparency into their plan fees, and in such an accessible,
customized way.”
Clients and non-clients alike now have access to a free 401(k)
fee analyzer tool powered by FeeX to get quick insight into their
401(k), 403(b) or other defined contribution plans. The tool
analyzes overarching administration fees, as well as individual
fees for the mutual funds within the plan, so that individuals are
looking at a detailed view of their specific investment holdings
and plan services fees. Users can then clearly see an objective,
side-by-side comparison of the fees associated with their 401(k)
account(s) versus other potential fees in a IRA. There of course
are other important considerations in making a rollover
decision.
Infographic - How the tool works
TD Ameritrade’s survey found that nearly three-quarters of
401(k) owners left an account behind at an old job and ended up
choosing one of three paths:
- Roll it over to a qualified
account (new employer plan or IRA)Nearly one-third of Americans
(31 percent) with an old 401(k) account roll it into a new
employer’s plan while slightly more (34 percent) choose an IRA.
When deciding between the two, it’s important to consider fees and
investment options. The common belief is that all 401(k) funds have
institutional pricing that's cheaper than those available to
individual investors, which is not always the case. Oftentimes,
similar securities with comparable holdings can be found in the
public markets at a lower fee. Relative to 401(k)s, IRAs can often
offer a wider variety of investments, tools and other resources
such as branch locations. And, if more than one 401(k) is involved,
consolidating multiple accounts into a single IRA can make it
easier to monitor and manage progress toward retirement goals.
- Leave it beThe 22 percent of
401(k) owners who keep the account with their original employer may
want to compare the fees and features of their plans versus those
of an IRA.
- Cash it outThirteen percent of
401(k) owners cash out their 401(k) accounts when leaving a job.
And yet, financial professionals often say this should be a last
resort for people not yet of retirement age, as investors can incur
tax consequences including penalties, and sabotage years of
retirement savings when cashing out before they are eligible for
the tax advantages involved with this type of investing. Investors
should take time to educate themselves and fully understand the
implications if considering this option.
About TD Ameritrade Holding CorporationTD Ameritrade
provides investing services and education to more than 11 million
client accounts totaling more than $1 trillion in assets, and
custodial services to more than 6,000 registered investment
advisors. We are a leader in U.S. retail trading, executing more
than 700,000 trades per day for our clients, nearly a quarter of
which come from mobile devices. We have a proud history of
innovation, dating back to our start in 1975, and today our team of
10,000-strong is committed to carrying it forward. Together, we are
leveraging the latest in cutting edge technologies and one-on-one
client care to transform lives, and investing, for the better.
Learn more by visiting TD Ameritrade’s newsroom at www.amtd.com, or
read our stories at Fresh Accounts.
Brokerage services provided by TD Ameritrade, Inc., member
FINRA (www.FINRA.org)/SIPC (www.SIPC.org).
TD Ameritrade and FeeX are separate and unaffiliated companies
that are not responsible for each other's services or policies.
Neither TD Ameritrade nor FeeX is acting in the capacity of an
advisor or making recommendations to TD Ameritrade clients or
potential clients in connection with the 401(k) fee analyzer tool.
The tool is for self-directed investors, for educational purposes
only.
Before rolling over a 401(k) to an IRA, be sure to consider your
other choices, including keeping it the former employer’s plan,
rolling it into a 401(k) at a new employer, or cashing out the
account value (keeping in mind that taking a lump sum distribution
can have adverse tax consequences). Whatever you decide to do, be
sure to consult with your tax advisor.
Source: TD Ameritrade Holding Corporation
1) FeeX 2016 proprietary data assembled from
401(k) fee disclosures: An evaluation of 81.4 million 401(k) plan
participants determined that 77.5 million, or about 95 percent pay
participant fees.
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version on businesswire.com: http://www.businesswire.com/news/home/20180129005124/en/
TD Ameritrade Holding CorporationFor Media:Becky Niiya,
402-574-6652Sr. Manager, Corporate
Communicationsrebecca.niiya@tdameritrade.com@TDAmeritradePRorFor
Investors:Jeff Goeser, 402-597-8464Director, Investor
Relationsjeffrey.goeser@tdameritrade.com
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