Find Out the Hidden Costs of Your 401(k) Plan ... Free

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Our 401(k) plans are in need of serious reform. They are laden with poor investment choices, hidden fees and conflicts of interest. Their primary beneficiaries aren't the investors, but rather the plan advisers and the mutual funds they offer, which often make "revenue sharing" payments so advisers will include them as investment options.Until recently, it was almost impossible for lowly plan participants to find out precisely how these high costs and poor investment choices were affecting their retirement savings. Now it couldn't be easier.

Brightscope is an independent service that provides detailed information about 401(k) plans. It just announced a new, free service that permits participants in 30,000 rated 401(k) plans to determine how much they are paying for the investments they have made in their personal 401(k)s. You simply identify the plan, answer a few questions about your investment options, and Brightscope will compute your total cost. It will also compare your costs to the average fee for a low-cost IRA investor and calculate the impact of the difference on your average balance over time.

I ran the calculations using the 401(k) plans available to employees of Google (GOOG) and Linear Technology Corp (LLTC). Both are technology companies. Using an example of a 45 year old with $50,000 in each plan, and a similarly allocated portfolio of assets, the difference was substantial. The fees for the Google plan were 0.55%. The Linear Technology plan had significantly higher fees of 1.14%. The Google employee would have approximately $53,000 more in her retirement account of $230,000 at age 65, based solely upon this difference in fees.

According to Ryan Alfred, co-founder and president of Brightscope: "We thought it was time for someone to step up to the plate and build something that solves the problem and tells participants exactly what they are paying."

Participants in 401(k) plans who find they are paying unreasonably high fees can use this information to lobby for lower-cost plans. Since it is unlikely that Congress will step up to the plate with meaningful reform, self-help may be the best option. This tool from Brightscope is a good start.
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