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SALT LAKE CITY — It seems like everyone is inundated by fees — travel fees, banking fees, car dealer fees, fees for exceeding the data limit on cellphones, boarding fees, parking fees and a fee if they cancel their cable service early, among others.
One set of fees dwarfs all those, while hurting prospects for retirement, and most people probably don't ever think about them — 401(k) fees.
Even though they could cost tens of thousands of dollars or more, most people have no idea what they're paying.
"I say it could be one of the worst fees you could encounter. It's excessive 401(k) fees," said Shane Stewart, a certified financial planner at Deseret Mutual.
Just how excessive? Let's say a person has $25,000 in his or her 401(k). It grows by an average 7 percent return over the next 35 years. With fees and expenses at .5 percent, they'll have $227,000 in their nest egg.
By moving those fees up by 1 measly percent a person's nest egg stops at $163,000. That's $64,000 less he or she would have to live on.
"It's all seamless," Stewart said. "You don't write out a check, you don't send in a payment. It comes right out of the 401(k). Most of us don't even know we have a 401(k) fee."
401(k) fees aren't like ATM fees because they're coming out of a person's earnings. For the past two years, federal law has required fee disclosures from 401(k) plans, but they're still widely misunderstood and overlooked. And while the fees can add up to thousands of dollars, most people might never know it because they're buried in fine print.
"Typically it's a 10- or 20-page document to get through and find out what it actually is," Stewart said.
Stewart, who helps manage 401(k) retirement benefits for Deseret Mutual, suggests people need to check the fee they are paying to invest those retirement savings. A plan's operating expense can range from as low as .25 percent to as high as 2 percent or more. But Stewart says if people are paying more than 1 percent, they are paying too much.
"It can be significant, especially compounded over the years," he said. "If you're not careful, they can eat up your gains."
If you're not careful, (fees) can eat up your gains.
Stewart says there are things people can do to limit their 401(k) fees: Ask the plan administrator to invest their money in index accounts. These funds are linked to a stock index such as the S&P 500.
"The administrative costs are fairly low because they don't trade every day," Stewart said. "They put the money in and let it work."
The "let it work" part is crucial. Stewart says every time people transfer their 401(k) they will pay fees, so avoid moving from fund to fund with market hiccups.
Also, borrowing against a 401(k) should be a last resort option. It can slow the growth of the retirement nest egg. And if people think their plan fees are out of line, they can contact their boss and ask if their plan offers lower- cost alternatives.