Who’s Actually Running Your 401k?

We are called into small businesses at least 1x a week to review 401k plans and help business owners establish new plans that meet the need of their workers in the most efficient manner.  What is amazing is that most owners and participants have no clue as to the abuse and scandal within 401k plans.  Some include high management fee’s and transaction costs within the plan which equal 1.5% to in one recent case 3.75% being taken off the top by the broker and mutual funds before workers saw dollar one.  The second pitfall is that most workers are unaware how to invest and consequently pick out their 401k funds from the ‘past performance data’ that is handed to them by Human Resource. Let’s see, this fund has a 10 year track record of 4.5% and this one has a track record of 12.5%.  I think I’ll put my money in the one that has gotten 12.5%.  Just remember, as I’ve noted in my “Mutual Fund Dishonesty” & “Mutual Fund Dirty Secrets” funds know this and so do brokers.  Accordingly, they create the illusion of success by doing such things as starting new funds in secret (incubator) to then release them if they’ve done well.  Better yet, they dissolve poor performers and ‘merge’ them into new funds so the losses are forever gone from statistics!

So before you invest in your 401k or if your a business owner with a 401k, read this article and start questioning the details on your plan.  You probably want to then see how much ‘your plan’ is actually costing and The Financial Coach can definitely help you find this information.

http://www.smartmoney.com/personal-finance/retirement/401-k-an-overview/