Half of Baby Boomers Don't Know They Pay IRA, 401(k) Fees
Given that, you'd think that people would pay close attention to the fees on their 401(k)s or individual retirement accounts. But you'd be wrong.
A recent national online survey of baby boomers commissioned by RebalanceIRA showed that 46 percent thought that they paid no fees at all. Another 19 percent thought the fees were likely less than 0.5 percent. Only 4 percent of the respondents thought that the fees could top 2 percent.
"Fee obfuscation has been around as long as there have been fees, and this survey is proof that the industry is still winning the battle," said Burton Malkiel, author of the investing book "A Random Walk Down Wall Street" and member of RebalanceIRA's investment committee, in the site's release.
Nibbling Away at Your Money
According to a "Frontline" report last year on PBS, the average actively managed mutual fund charges 1.3 percent in fees on the total in the account, not on the year's gain. Over decades, that can run into the hundreds of thousands of dollars. "And that's the difference between running out of money before you die -- or having a little money left to pass on to your heirs," Ron Lieber, the Your Money columnist for the New York Times, told "Frontline."
According to ReblanceIRA, 401(k) fees now average 1.5 percent. IRAs are no better, even though FINRA, the investment regulatory agency, noted last year that it saw many cases of "overly broad language in sales material of broker-dealer firms that implies there are no fees charged to investors who have accounts with the firms."
It's not just fees that are a mystery to many. A fifth of survey respondents -- 1,165 U.S. adults, aged 50-68 and working full-time -- didn't even know what percentage of their portfolio was in stocks or stock funds.
Two-thirds said they were either somewhat or very anxious about their ability to retire with enough money. For good reasons, it would appear.
The best advice: Determine exactly what fees you are paying today, and see what comparable lower-cost options you can switch to. Then make those moves now rather than sometime in the future, when you'll have already wasted even more money.