THE NEW RULES OF RETIREMENT SAVING • 91
As you can see in the accompanying chart, there are a variety of fees in all products. Fees are how the companies providing these savings vehicles make money. Fees have to be an accepted part of your retirement savings plans. But you don’t want to pay more fees than necessary. The fact of the matter is, 401(k) and IRA fees can be very high. The average cost for a 401(k) plan with fewer than one hundred employees is 1.4 percent. For more than one hundred employees it’s 1.03 per- cent. ¹⁷ That fee is charged on your funds every year as you’re working and contributing money, and when you’re retired and drawing down money. If you are in a 401(k) plan, not only are you paying an adminis- trator to manage the 401(k) plan itself, but every time you put money into a mutual fund you have an additional set of fees that you're paying. What do those fees buy you? Well, you get access to mutual funds, and maybe some investment advice. In an IUL policy you pay a “cost of insurance” fee and “general expense” fees. For these fees, you get some real benefits: a death benefit, tax-free savings growth and, of course, the power of index- ing to grow your funds over time. Sure, you’re thinking, you get a lot for those fees. But the fees are still so high! That’s What Neil Thought Neil, a team member in my office, came to us from the world of managed money. His background is in investing, and he didn’t trust life insurance as a savings vehicle. Why, you might ask? He had always been told it was too expensive.
¹⁷Society for Human Resource Management. Feb. 28, 2013. “401(k) Plan Fees Declined — Slightly — in 2012.” https://www.shrm.org/resourcesandtools/hr-topics/benefits/ pages/401k-feeseclined.aspx.
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