Prepared to work an extra three years to pay for your 401(k)? - WECT, weather & sports Wilmington, NC

Prepared to work an extra three years to pay for your 401(k)?


Even if you worry about retirement, you may not know the hidden fees eating away at your 401 K.

"It's a scary proposition to think that social security might not be there when you need it so my husband and I think about it all the time," Melissa Williams told us in Charlotte today. But when we asked her if she knows how much she pays for it, she said no.

Williams is hardly alone.

"At my age I think about retirement all the time," said Charlotte resident Justin Booker.

But does he know how much is 401(k) costs him?

"Um, not right off the top of my head," Booker said.

The answer is shocking. Analysts say today's very typical 401(k) fees will zap seventy grand from the average worker's account over the course of a career – their data based on both industry and government data.

To compensate, most people will have to work an extra three years.

"When you add it up like that, sounds like a lot of money," said John Paglia, also in Charlotte Friday. "And a lot of extra time spent working to make that up."

A big part of the problem is this - employees rely on their employers to negotiate with money management firms on their behalf, in part, because companies can use their size to negotiate discounts. And at one time companies were doing a pretty good job.

But now there are more and more complaints of conflicts of interest.

Last month, a group of Novant Health employees filed a class-action lawsuit accusing the company of passing along excessive 401(k)-related fees.

And Wal-Mart recently paid $13.5 million to settle another suit - 401(k) participants said the retailer failed to negotiate lower fees for their mutual funds.

And while a lot of companies aren't necessarily breaking laws, they may have just stopped pushing hard for discounts.

So what can you do?

Investigate your 401k provider's fee structures. A 1% fee per year may sound modest, but it's not over the long haul.

If your employer uses a retirement manager that's too expensive, sit down with HR to ask for change, and inform your colleagues of the problem so they can get behind you.

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