Small Differences in Retirement Plan Fees Can Really Add Up
92When switching jobs, retiring, or starting a business, many people choose to roll their 401(k) savings to an IRA in the same mutual fund. Unfortunately, this approach can lead to the loss of thousands of dollars over time because of what may seem like a small difference in fees.
How does this happen? And why didn't you know about it? Watch this animation for insights that can help you avoid toppling your retirement plans.
Interested in learning more? Explore more in-depth research on mutual fund costs: https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2022/06/small-differences-in-mutual-fund-fees-can-cut-billions-from-americans-retirement-savings
*Full transcript*
Building savings for your retirement is like balancing blocks.
Each piece needs careful consideration
and it can be confusing with so many investment options.
How do you build towards a more secure future?
One important block to consider is fees.
You’re already saving to a 401(k) for retirement. Good job!
But now you plan to switch jobs, retire, or decide to build your own business
and can no longer contribute to your 401(k),
so you roll over your savings to an IRA in the same mutual fund.
But IRAs stack on higher fees.
These small differences can have a big impact on your savings.
Let’s say you invest $30,000 into an IRA instead of your 401(k) at the same rate of return without any contributions or withdrawals.
When you compare your old 401(k) investment to your new IRA, over 40 years the lower fees in your 401(k) allow you to build almost $65,000 more in savings than a higher fee IRA.
How do you avoid toppling your retirement plans?
Don’t feel bad if you aren’t sure.
These fees tend to be hidden in lengthy and sometimes confusing disclosures.
Your decisions need to be supported with clear, easy to find information.
The stakes are high for choosing the right pieces.
Because even a small difference in fees can knock down or build up your hard-earned savings.