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High Fees in Your Pension Plan

If you are one of the many American saving for retirement using an IRA and a 401(k). You might also be one of the many workers whose returns are being eroded by high-cost funds. Retirees are moving their pensions into high-fee accounts at a shocking rate – a rate that could quickly deplete most saver’s nest eggs.

For retirement savers, every dime matters. It may seem cliche to say; however, even the slightest difference in investment costs could cost retirees a lot of money in the long run.

So, why are retirement investors paying for their account fees with their futures?

The answer may be the fact that retirement assets have shifted over the years from traditional pension vehicles (like 40(k)s, that are employer-sponsored) to IRAs. Over the past 20 years, employers began to fade out traditionally defined pension plans in favor of 401(k)s, and now 401(k) savings are being replaced by IRA accounts.

IRA accounts may be the problem here. IRA accounts now hold the largest share of retirement assets compared to other pension vehicles. According to the Center for Retirement Research at Boston College, investment costs in IRA accounts are higher than the investment funds in 401(k)s and traditional pension funds.

Lower Investment Returns, Higher Investment Fees?

The center for Retirement Research, or the CRR, found that traditional pension funds grew an average of 4.7{bc669dfb3651bb8509a96034cbe7494d3a811fc0eedf0ddccb239fb9cb737439} annually. A 401(k) account grows an average of 3.1{bc669dfb3651bb8509a96034cbe7494d3a811fc0eedf0ddccb239fb9cb737439} annually and only 2.2{bc669dfb3651bb8509a96034cbe7494d3a811fc0eedf0ddccb239fb9cb737439} for IRA accounts.

The lack of performance in IRA accounts could have to do with how assets in these accounts are allocated, with cash portions averaging 11{bc669dfb3651bb8509a96034cbe7494d3a811fc0eedf0ddccb239fb9cb737439} compared to the 4{bc669dfb3651bb8509a96034cbe7494d3a811fc0eedf0ddccb239fb9cb737439} held in money markets by other pension fund managers.

A lot of performance lag has to do with fees that investors pay. A lot of individuals who choose investment accounts on their own, do not have the financial knowledge to choose inexpensive means of investing. For example, the primary difference between 401(k) retirement plans and other pension plans is the higher funds in a 401(k) savings plan for brokerage and additional investment options.

If you are paying high fees and seeing little returns, you may want to consider a different investment vehicle.

Avoid High Investment Fees

Financial Advisers Could Be Part of The Problem

An investors needs to take time to choose a trustworthy financial adviser. This can lead to avoid many high investment fees, by getting the correct help.

A lot of financial advisers will target investors who want to move their savings into an IRA from a 401(k), pressuring investors to place their nest egg into higher-cost investments in order to secure themselves a commission.

The good news is that not all financial advisers do this; it’s simply a matter of shopping around and finding an individual you trust. Additionally, you should be sure to do your own outside research on investment vehicles to ensure that you aren’t being taken advantage of.

What To Do To Combat Your High Investment Account Fees

If you already have a 401(k), you can take matters into your own hands and keep your investment costs low. There are always options to check out the fees your account charges currently. Additionally, you should look into rolling your nest egg into an IRA, which may be a better low-cost savings tool for you and your situation.

Additionally, you should seek the help of a professional. We recommend reading reviews and shopping around before settling on one adviser. You should look for an adviser who is knowledgeable and who takes the time to explain all investment options. You need to make the best financial decisions based on your financial situation.

Most importantly, you should never feel pressured by your financial adviser.