Comments on: How Good is Your 401K? Ask BrightScope

By: Elysia

Elysia — Thu, 01 Jan 1970 00:00:00 +0000

This is useful; I’m still struggling to figure out exactly how to pick where to allocate my 401k (and sadly I’m not in BrightScope — that looks really useful). I find it annoying that you have to pick & search for this information, when it should really be right there in front of you to make a good decision!
I’m looking at my Basic Financial Statement from my Summary Annual Report, and it says :
“Benefits under the plan are provided through insurance and through a trust fund. Plan expenses were $211,988. These expenses included $225 in administrative expenses and $211,763 in benefits paid to participants and beneficiaries. A total of 201 persons were participants in or beneficiaries of the plan at the end of the plan year.”
So… um… does that mean that my plan expenses were actually $225 (for the company), making the cost to me about $1.12 per year (225/201 persons)? Or am I not getting it?

By: DIY Investor

DIY Investor — Thu, 01 Jan 1970 00:00:00 +0000

Great piece. Brightscope’s work needs to be publicized. It is an important force bringing investment costs down.
I would like more info on how they rank investment choice.

By: TheLoneRanger

TheLoneRanger — Thu, 01 Jan 1970 00:00:00 +0000

401K fees can be quite expensive. Besides fund expense ratios, there are also trading costs (how much it cost to actually buy and sell securities inside the funds). These are often not listed in the prospectus but in a document called SAI – statement of additional information. If you fund has a turnover of 100% it could mean additional expenses of up to or over 100 basis points (1%). Add this to your expense ratio and admin costs and funds can add up.

By: Hashim

Hashim — Thu, 01 Jan 1970 00:00:00 +0000

That is a great article and Brightscope is doing good work.

In a 401(k) plan, your account balance will determine the amount of retirement income you will receive from the plan. While contributions to your 401k account and the earnings on your investments will increase your retirement income, fees and expenses paid by your plan may substantially reduce the growth in your account. The following example demonstrates how fees and expenses can impact your account.

Assume that you are an employee with 35 years until retirement and a current 401(k) account balance of $25,000. If returns on investments in your account over the next 35 years average 7 percent and fees and expenses reduce your average returns by 0.5 percent, your account balance will grow to $227,000 at retirement, even if there are no further contributions to your account. If fees and expenses are 1.5 percent, however, your account balance will grow to only $163,000. The 1 percent difference in fees and expenses would reduce your account balance at retirement by 28 percent.

By: PT

PT — Thu, 01 Jan 1970 00:00:00 +0000

@Stay – Yeah, those admin costs were new to me as well. They hit you with them when you purchase new shares (i.e. make contributions).

@Lean – That’s nice of you to say. I enjoyed writing this one for sure. And interviewing Mike was fun. Very cool guy.

By: LeanLifeCoach

LeanLifeCoach — Thu, 01 Jan 1970 00:00:00 +0000

Now this is the kind of info that got me started reading blogs. Simply fabulous!

Thanks for putting the time and effort into sharing this with us!

By: Mom CFO

Mom CFO — Thu, 01 Jan 1970 00:00:00 +0000

I actually never knew I was paying “Administrative Costs” in addition to my individual fund Expense Ratios and investment fees (ex. 12b-1 fee)!
In what form are these administrative costs passed onto the individual participant in the 401k?