According to a new study by the AARP, 401(k) plan participants are largely unaware of the fees they pay to their plan providers. More than seven in 10 (71 percent) plan participants claimed they did not pay any fees, even though they do, and six percent said they did not know whether they paid a fee.
When the fees were explained to them, six in 10 couldn't identify the amount of their fees.
"Americans are trying to plan for their retirement without all the information they need about their 401(k) plans," said Jean Setzfand, AARP Director of Financial Security in a statement. "The research shows a clear lack of understanding about 401(k) fees and the impact they might have on one's saving."
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To help participants better understand their plan fees, the AARP has created a 401(k) Fee Calculator. The tool estimates the fees associated with individual plans and compares them to the average for a low-cost 401(k) investor. It also estimates any potential impact the fees will have on the participant's balance when the time for retirement comes.
Other findings from the study include:
- Thirty-two percent of plan participants say they do not feel knowledgeable about the impact fees could have on their retirement savings. However, 81 percent believe that the fees charged for investments are very important or somewhat important in decisions about their 401(k) investments.
- While most plan participants (63 percent) have contributed money to their 401(k) plan, 22 percent have withdrawn money or received payments from their 401(k) plan.
- Almost two-thirds (64 percent) stated that they prefer to make their own decisions about saving and investing rather than taking the suggestions of a financial professional.
- When respondents were asked how confident they are about having enough money to live comfortably throughout their retirement years, 74 percent stated that they are very confident or somewhat confident. Not surprising, since most respondents (64 percent) report that they have tried to calculate how much money they will need to have saved by the time they decide to retire so that they may live comfortably in retirement.
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