Beware of Hidden Fees
Expense ratios are the easiest thing to watch, but don’t think that’s the end of the story. Responsible investors need to do a bit of detective work if they want to know the whole story about what they are paying for.
Most companies have to report fees and expenses of their employee benefit plans by law, unless they are of a very small size. This commonly is done on the “transaction history” or similarly labeled section of your regular 401k statements. If you see a small dollar amount withdrawn or partial shares taken out, you can bet an administrative fee is the culprit.
If you can’t find any fees in the transaction history on your account statement, your human resources department should be able to get you an ERISA filing — short for Employee Retirement Income Security Act. This law requires fees to be logged in some manner, and they should point you in the right direction.
Sometimes the fees are baffling, including varying in size based on the amount of money in your account. And sadly, there are some administrative fees you just can’t avoid because employers only offer one 401k provider. However, it’s important to know what you’re paying — because if the fees are steep, it might be in your best interest to consider alternatives to simply relying on 401k investing alone.