Harness Money

99% of 401k plans have fees. It is a lucrative financial product for 401k providers.

Over 60 million American contribute to a 401k. This is understandable considering 401k plans offer employees the ability to contribute funds pre-tax in order to save for retirement. This is invaluable for high cost of living and tax states like California and New York. Many companies also provide an employee contribution match up to a certain amount. This essentially makes a 401k a part of an employees compensation.

401k are far from free. These fees can cost you hundreds of thousands of dollars over your lifetime.

401k General fall into 4 categories:

– Investment

– Administrative

– Individual service

– Custodial

Here are examples of fees you may end paying:

– Asset Based Management Fee – Payment to the 401k provider for holding your assets

– Processing Fee – Purchasing new shares of stock when an employee makes a contributing

– Fund Management Fee – Any of the funds you invest into generally have a fee between: .05%-2%

– Withdrawal/Transfer Fee – Whenever you take money out or transfer money away

– Consulting Fee – Whenever you contact your 401k provider for information

These are just examples of fees. Read your plan carefully to understand what fees you are paying.

Only choose mutual funds that have the lowest possible fees. Monitor your account over time to make sure that your provider is not adding unnecessary fees.

Strategy

Consider this strategy.

Only deposit enough money into your 401k plan to receive your company match. Anything above the match do not contribute to the 401k. Instead open your own personal traditional IRA, ROTH IRA or stock brokerage account. And invest the rest of your funds into those accounts which have lower fees and more investment options.