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July 01, 2011 at 08:48 AM
The miracle of compounding interest turns small percentages into big returns in retirement plans. But it’s a double-edged sword, and removing small percentages in the form of fees can do serious damage over the long term. SmartMoney’s Robert Powell runs through the worst.
“It's said that what you don't know can't hurt you. Not so,” Powell writes. “What you don't know can cost you, and sometimes cost dearly. Case in point: Advisers and others say there's a host of unknown costs and fees lurking inside your 401(k) plans, IRAs and other such retirement accounts. And often, those fees can make a world of difference in your overall investment returns.”
He notes many Americans are simply unaware of the fees they pay to their plan providers, and points to the startling statistic from AARP “that more than seven in 10 (71%) 401(k) plan participants incorrectly reported that they did not pay any fees.”
However, to borrow John Kerry’s failed 2004 presidential campaign slogan, “Help is on the Way.” Beginning on Jan. 1, 2012, plan sponsors will have to disclose the fees participants pay for their 401(k) plans.
Powell turns to Denise Appleby, CEO and founder of RetirementDictionary.com, for help in rounding up 10 of the fees that can eat away at retirement savings:
1. Account termination fees
2. Account maintenance fees
3. Various account transfer fees
