5 Worst Ways Your 401(k) Fees are Hidden In Financial Paperwork

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5 Worst Ways Your 401(k) Fees are Hidden In Financial Paperwork

At FeeX, we’re committed to finding the costs in your retirement accounts and showing them to you in a clear, organized way — so you can see exactly how much you’re paying for the privilege of investing.

We talk about “hidden” fees a lot — but at a time when 401(k) providers are technically required to disclose their fees to you, how do these fees stay hidden?

A lot of it has to do with the way fees are displayed and described in financial paperwork: fund prospectuses, fee disclosure forms, and more. FeeX lets you send your own fee disclosure paperwork so we can process it and add it to our database—letting you and thousands of other users find and reduce your fees even faster— so we decided to dig into our own fee database to find examples of financial paperwork obscuring your investment fees. Of the over 40 examples of both blatant and sneaky fee-hiding that we found by perusing our database, these five were the worst!

1. The ‘footnote fee’

state street fund footnote (but good exp ratio)

How it’s hidden

The funny thing is, the fee on this isn’t that bad at all – it’s a passively managed fund with a miniscule .02% expense ratio, which is peanuts in comparison . The bigger issue is the way this prospectus treats fees—as a footnote. There’s an almost comical amount of space between their message about risk and the fee disclosure, which manages to be typed in an even smaller font than the risk message.

Related Posts: 4 Reasons to Find Hidden Fees and 2 Ways to Actually  Do That!


Is this how fees should be treated? Stuffing them at the bottom of a document just encourages the idea that fees are meant to be hidden. If anything, this financial institution should be trumpeting their relatively good fee from the rooftops!

2. The ‘novel-length fee’

novel length exp ratio

How it’s hidden?

In the time it’d take you to closely read this whole thing, you could probably cook a Thanksgiving turkey and get a couple of side dishes done too.

Listen, we know that there are all kinds of legal requirements for how fees get disclosed, and how financial language has to be expressed. Still, this disclosure is long enough that the whole point of the document—to make the investor aware of the fees they’re taking on—gets a bit lost.

That’s where FeeX comes in: to simplify how investment fees are shown, and to show them to you in a way that takes into account not just what you’ll pay in fees this year, but over the course of your retirement savings. Goodbye, novel-length fee statement.

3. The ‘connect-the-dots fee’

nationwide look at diff doc for fees

How it’s hidden?

Because there are fees by the plan administrator that aren’t on the doc! Making investors jump through hoops to understand their fees isn’t very user-friendly—another case of retirement provider bureaucracy getting in the way of an easy experience for someone who wants to save for their retirement.

There’s probably a good reason there are two separate documents—like the fact that there are fees coming from two separate companies—but all it does is make it less clear how those cumulative fees affect your bottom line. And as we know from compounding fees, what you don’t know can definitely hurt you and your wallet.

4. The ‘undefined fee’

principal 1 - exp ratio

principal 2 no exp ratio

How it’s hidden?

First, note the tiny blue type going on here. Our eyes are starting to tear just looking at it.

Second, an interesting dilemma in their fee disclosure form — in it, they show the “exp. ratio” of all their available funds, expressed as a percentage and as a dollar amount out of a thousand, and they also offer investors the use of their glossary to help them understand their financial terms.

Weirdly, expense ratio doesn’t feature in their glossary! If investors are relying on Principal’s materials alone to make informed decisions about their investments, they’ll be high and dry when it comes to understanding what the heck that “exp. ratio” percentage is.

5. The ‘arithmetic fee’

standard high exp ratio

How it’s hidden?

This is the ultimate hidden fee—it’s a fund “expense” presented as a percentage, with an extra asset-based fee tacked on based on how many people have invested in the company’s plan. You’re more or less left up to your own devices to find out how those percentages will affect your balance as a whole.

More importantly, these fees are steep! Paying over 1% on your balance can end up crippling your retirement savings in the long run—it’s 1% now, but compounding can turn it into 20 or even 30% of your savings long-term. And that asset-based fee is taking relatively cheap funds like the Vanguard 500 Index one and making them much more expensive, which is a common “repackaging” practice in 401(k)s.

Fees are important, and deserve as much attention as performance and asset allocation. Without knowing what the fees on your investments are, you won’t understand how your savings will be affected long-term — the more you know about fees, the better decisions you can make for your retirement accounts. FeeX helps with that every step of the way—sign up for a free account and see for yourself.

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What other annoying fees have you encountered and aren’t on the list?


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Nothing in this article should be construed as investment advice, or a solicitation or offer, or recommendation, to buy or sell any security. Investing in mutual funds, exchange traded funds, and other securities carries risk of all or part of the amount invested. Past performance is no guarantee of future results. FeeX assumes no responsibility for the tax consequences to any investor of any transaction. Investors should confer with their personal advisor or tax professional regarding their particular circumstances.

Keep in mind that this is only an example of one fund and an alternative and does not represent all users’ accounts.