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Low-cost 401k?
Old 07-10-2009, 05:31 PM   #1
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Low-cost 401k?

I was helping my sister look over her 401k plan, trying to figure out what she's paying in fees. In general, it's a good plan - company match of a few percent, and some index fund options.

She's invested in the index funds and also some in the non-indexes. So my thought was to compare the costs because it seemed likely worth moving everything to the indexes. But when we clicked on the "expenses and fees" tab, all it gave were the expense ratios. These were all well under 1%, although the indexes were of course the lowest.

Are we missing something? I didn't know non-index funds existed that were as cheap as indexes. But we couldn't find anything anywhere that mentioned additional costs of owning the other funds. I know that 401ks are notorious for hidden fees, but don't they at least have to tell you what it costs to buy the funds?

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Old 07-10-2009, 05:38 PM   #2
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When we looked at DH's 401(k) online we could click on "transactions" and every month there was a small-ish red number for the administration fees for each fund he had $$ in. If your sister has online access maybe you can find it there?

The info on DH's funds was surely also buried in the annual required paperwork about the plan (six pages of fine print for each fund), but it was not publicized anywhere else.
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Old 07-10-2009, 07:59 PM   #3
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My spouse is in a 401(k) plan from Hartford. In the yearly report it has a page on expenses and fees. It has the expense ratios of the funds (outrageous) and then a line that says
Other fees and expenses* 0.00%

The * at the bottom says something like "All other fees and expenses except other fees and expenses charged to the participant." Needless to say, there is another 1.25% in fees charged that is found in the fine print about 5 pages later. I guess their hope is that one stops looking after that early page.

Some plans from Megacorps have very low fees and expense ratios. Usually companies with less than 200 employees saddle the employees with huge fees in the 401(k).
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Old 07-11-2009, 11:28 AM   #4
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These are good ideas, thanks. I'll have her take a look at the transactions and the paperwork, I'm sure she has that somewhere or can get it online.

It's a large company, so maybe it's not as bad as some.

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Old 07-11-2009, 11:34 AM   #5
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Or she could call and ask.

As for expense ratios for actively managed funds: Vanguard has actively managed funds with low expense ratios. Where the expense for a 401K come in is in the administrative fee on top of OERs for funds. So the best you can do is to pick funds with low ER -- hopefully they fit your AA and are good performers.

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