You wouldn't authorize a company to dive into your checking account at will to withdraw money for undisclosed "services rendered"? That would be crazy.
"But that's what many people are unwittingly doing with the retirement plans," says financial advisor Philip Rousseaux, a member of the Million Dollar Round Table association's Top of the Table forum for the world's most successful financial services professionals.
"While a new law now requires disclosure of previously hidden fees applied to 401(k) plans, it's up to you, or your financial advisor, to find and review that information and determine whether the fees are reasonable," says Rousseaux, founder and president of Everest Wealth Management, Inc. (www.everestwm.com).
By some estimates, up to 90 percent of fees attached to retirement plans are hidden.?As of July 1, 2012, the new Department of Labor rule requires all hidden fees attached to retirement plans and mutual funds be disclosed to employers and employees.
"For many 'average joes' with 401(k) and 403(b) savings plans, disclosure hasn't helped at all," says Rousseaux. "The paperwork supplied can be so dense and full of jargon, they can't make heads or tails of it. I've even heard some financial advisors say they've seen statements that were nearly impossible to read."
Meanwhile, the Department of Labor is reportedly investigating 50 complaints of violations of the new rules.
Rousseaux offers these tips for examining and understanding retirement plan fees.
Rousseaux notes that it's also important to look at the expense ratio for your plan, which should now be stated in dollars under terms of the new Labor Department regulation. "Generally, the lower the ratio, the bigger the fund will grow," he says.
If you find any of these fees are draining an unreasonable amount of your retirement savings, you might consider rolling the money into another savings plan, such as a Roth IRA or fixed-rate variable annuity, says Rousseaux.
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