Many individuals are ignorant to the myriad charges that are applied to 401(k) accounts. Many 401(k) plans, which are intended to ultimately provide for one’s retirement, carry higher fee schedules than mutual funds.

[b]Getting the right data[/b]

In order to keep dealings honest, you would expect both parties to give all necessary data to each other. It is called “information asymmetry” when one party knows more than another party. There are technically laws in the marketplace that require corporations to give consumers all the data, but it does not always occur. You cannot always expect every person else to be honest.

The New York Times points out that legislation recently passed requires that more data about fees associated with 401(k) accounts be given to employers that purchase group plans and account holders. The data for the accounts is one of the ones where one party holds more info than the others. The charges associated with the 401(k) plans are not always given to people fully, according to a Government Accountability Office.

According to a Transamerica Center for Retirement Studies survey, 71 percent of respondents with a 401(k) plan do not have any idea that there are fees on the account. Not every person knows about the fees, according to Time magazine. They are just like other investment accounts though.

What some might not understand is that a 401(k) isn’t really a savings account, but rather a diversified investment portfolio with a tax deferral. Comparable charges to those applied to mutual funds, according to Daily Finance, are applied to 401(k) accounts. Mutual funds have an “expense ratio” or fee to cover costs of administering the fund like administrative overhead, the costs of trading shares, marketing expenditures and so forth.

The 401(k) account is the same as mutual funds, except mutual funds only have expense ratios at 1 percent, according to Time magazine; 401(k) plans can go as high as three percent.

[b]Huge fees[/b]

According to the New York Times, what many employers with a 401(k) plan do not know is that a number of brokers are charging additional charges such as investment management fees and fees charged by plan providers for using 3rd party services.

Hidden charges make it extremely hard for corporations to even recognize the amount of cash they are putting into the plans. About 50 percent of those corporations surveyed in the GAO survey were mistaken about the amount of money they were putting into the plan. One business though it was only paying $3,800 a year to share benefits with workers, but really the company was paying $62,000 a year.

With all the additional charges, you will lose a lot of money as part of your account that could be used for retirement. The average person pays about $20,000 over a 20-year period, or $248 a year, in 401(k) fees, according to the Investment Company Institute. Time explains that a Demos survey found that these fees could drop the amount of cash in your final account by 30 percent. You may not end up with as much cash as you envisioned with the charges being taken out like this.