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401(k) Fees at Betterment

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What are 401(k) fees?

401(k) fees are charges associated with managing and maintaining a 401(k) retirement plan. These fees can significantly impact the growth of your retirement savings over time.

What can employers do to manage 401(k) fees?

As a plan sponsor, it's your fiduciary duty to help to ensure that the services provided to the plan are necessary and that the cost of those services is reasonable. Benchmarking your plan's fees against similar retirement plans can help determine if they are reasonable.

What steps can I take to monitor my 401(k) fees?

  • Review Fee Disclosures: Regularly review the fee disclosure documents provided by your plan administrator.
  • Benchmark Fees: Compare your plan's fees against similar plans to ensure they are reasonable.
  • Consider Plan Size: Larger plans often have lower fees due to economies of scale.
  • Negotiate with Providers: Discuss fee structures with your plan provider to identify potential savings.

How do 401(k) fees impact employees' retirement savings?

Higher 401(k) fees can take a major bite out of your participants’ retirement savings. For example, over a 40-year period, a 1% fee could result in a significantly higher account balance compared to a 2% fee.

What is the employer's fiduciary responsibility regarding 401(k) fees?

Employers have a fiduciary duty to ensure that the services provided to the plan are necessary and that the cost of those services is reasonable. This includes regularly reviewing and benchmarking fees to ensure they align with the services provided.

How can employees be informed about the fees they are paying?

Employees should be provided with fee disclosure documents that outline the fees associated with their 401(k) plan. Encouraging employees to review these documents can help them understand the impact of fees on their retirement savings.

What are the consequences of not managing 401(k) fees effectively?

Failing to manage 401(k) fees effectively can result in reduced retirement savings for employees and potential fiduciary breaches for employers. It's crucial to regularly review and manage these fees to ensure they are reasonable and necessary.

How does Betterment maintain transparency in 401(k) fees?

Betterment is transparent about their fees and doesn't hide future costs. They provide clear information on plan administration fees, investment fees, and individual service fees, allowing employers and employees to understand the costs associated with their 401(k) plans.

By understanding and actively managing 401(k) fees, both employers and employees can work towards maximizing retirement savings.