Do you know how much you pay for your retirement plan?
According to “The Retirement Savings Drain: The Hidden and Excessive Costs of 401(k)s,” published by public policy think tank, Demos, the average worker will lose $154,794 to 401(k) fees over his lifetime, based on an annual income of approximately $30,000 per year and saving 5 percent of his income. A higher-income worker making approximately $90,000 per year will lose upward of $277,000 to fees. (SOURCE)
Yet the majority of investors are in the dark about the fees their 401(k) plan charges. A recent AARP study found 65 percent of accountholders had no idea they were even paying fees, and 83 percent didn’t even have a basic understanding of the many fees and expenses everyone with a 401(k) pays. That’s because these fees are taken “off the top” of investment returns or share prices; in other words, the rates of return and share prices reported on account statements are post-fee.
Hidden fees are just one problem plaguing the typical 401(k). There are three more problems:
- Poor performance: Most 401(k)s offer only actively managed stock funds. It’s well documented that money managers who try to beat the markets fall short. A staggering 86 percent of active large-cap fund managers failed to beat their benchmarks in the last year, according to an S&P Dow Jones Indices scorecard released last September. And because they are actively managed, these funds are the most expensive investment choices available.
- Fees on top of fees: When bundled up and put into an employee plan, a whole host of additional costs are added on top of the fund fees to compensate the underwriter or broker administering the 401(k) plan.
- Substandard investment choices: There is a very high likelihood the funds in your plan were selected not because they were the lowest cost or best performing. They are on the “menu” because they are willing to pay hefty fees and commissions to the broker and plan provider.
What’s that add up to? Sadly, investing in most 401(k)s can be the most expensive way to achieve below-par returns.
In 2012, the U.S. Department of Labor (DOL), responsible for overseeing 401(k) plans, passed legislation under Employee Retirement Income Security Act (ERISA) requiring these fees to be disclosed to plan participants. The legislation also put the burden of providing a low-cost 401(k) plan on any employer offering a plan, requiring they regularly perform a benchmark analysis and verify that the fees paid by a plan to its service providers are both reasonable and necessary.
Complying with the legislation, 401(k) investors were sent pages and pages of fee disclosure statements. But this did little to change the status quo, in large part because participants found the disclosures too complex to dig through. The statements were lengthy, some over 30 pages. According to LIMRA, a trusted source of industry knowledge for over 850 financial services firms, even though workers received detailed information about the cost of their 401(k) plan, half of them still do not know how much they pay in plan fees and expenses.
In April 2012, America’s Best 401k (ABK) entered the 401(k) marketplace, which has historically been dominated by national payroll companies, insurance companies and Wall Street brokerage firms. CEO and Founder, Tom Zgainer, formerly vice president of corporate retirement plans for Personal Capital, explains ABK’s mission is fourfold:
- Keep the costs to the plan and participants as low as possible.
- Provide funds that have better-than-average long-term performance, compared to their peers.
- Offer enough funds to allow participants to build a diversified portfolio.
- Ensure investment options satisfy fiduciary liability with respect to fund selection and maintenance.
Led by Zgainer and registered investment advisor, Michael Rogers, who has 23 years of experience in retirement plans and a host of designations (QPA, AIF, GPFC, CPC and QKA), America’s Best 401k has a team of retirement plan designers and actuarial experts that serve three types of customers:
- Employees who want to ask their employer to analyze fees in their current 401(k) offering and consider a switch.
- Business owners wanting to create a new 401(k) plan — For business owners, who have a fiduciary obligation to their employees to provide a plan in the employees’ best interests, ABK installs a third-party professional fiduciary to help alleviate liability and provide a plan designed to meet a variety of individual risk tolerance profiles.
- Business owners with an existing 401(k) plan — Business owners who want to benchmark their current plan can get a free report detailing all fees, to compare their current plan to America’s Best 401k plan.
Plans Offered With America’s Best 401k
- Defined Benefit Plans
- Cash Balance Plans
- Profit Sharing
- Payroll Services
America’s Best 401k has an effective cheerleader: Tony Robbins, author of “Money: Master the Game.” At the time of writing his book, Robbins was searching for a better plan for his company and became a client of America’s Best 401k. He then decided to join as a partner and lend his voice to get the word out. Fans of Tony’s book will be glad to know the All-Seasons Portfolio he describes in the book is available through America’s Best 401k.
Features and Annual Fees
- Free 401(k) “fee checker” — A no-cost analysis of your existing 401(k) plan that reveals all the fees in your personal 401(k).
- Low 401(k) fees — While the industry average plan cost is between 0.89 percent and 1.89 percent, ABK charges a flat fee of 0.75 percent or less, regardless of assets under management.
- Low Cost Mutual Funds — Americas Best 401k offers a core fund lineup primarily using index funds from Dimensional Fund Advisors (DFA) and Vanguard.
- Fee Transparency — America’s Best 401k provides a “line item” pricing proposal where every fee is explicitly shown. No fees are received from the underlying funds by America’s Best 401k, so there’s no conflict of interest. ABK is motivated to select the best-performing, lowest-cost funds available.
|Plan Size||Industry Average “All In” Plan Cost||America’s Best 401k|
|Less Than $1 Million||1.89 percent||0.75 percent or less|
|Between $1M and $10M||1.27 percent|
|Between $10M and $50M||0.89 percent|
Additionally, if plan sponsors are interested in adding compatible quality investment choices from additional fund families, this option is available.
- Free Fee Analysis — I’m self-employed without a 401(k), so I submitted my husband’s company plan and instantly received an analysis, including a chart showing how these fees impact the plan over a 20-year period. The specific findings for his company’s plan, which has 24 participants and $2.3 million in plan assets, is a projected savings of $558,816.45.
- Transparent Fee Schedule — America’s Best 401k offers a clearly defined fee structure of 0.75 percent or less for the “all in” investment related expenses. This includes the average expense ratios of the funds in their core lineup, custody of the assets and a menu of fiduciary and non-fiduciary services.
- Low-Cost Annual Fee and Low-Cost Funds — Quite simply, lower fees mean significantly more retirement income for you. It’s estimated a 1 percent reduction in annual fees equals an additional 10 years of retirement security for the average investor. America's Best 401k offers a core fund lineup averaging only 0.12 percent on expense ratios.
- Employees Can Review Plan Expenses — As an employee, all you need to do is provide your name, email address, and company name or 401(k) plan name to get a cost analysis you can print out as a PDF or email directly to the person in charge of administering your plan.
- Requires Employer to Switch — While America's Best 401k provides a no-cost "fee checker" that is quick and easy for any employee to complete, doing so merely starts what might be a long process that could lead nowhere. That's because the decision maker is the small biz owner who needs to be convinced to take action.
As the name implies, America’s Best 401k is a low-cost retirement custodian service. We believe the selection of available funds and low annual fees make ABK a great choice for many small businesses that are currently getting hit with high annual fees and poorly performing actively managed mutual funds.
Quite simply, lower fees mean significantly more retirement income and/or the opportunity to retire sooner. As with many things in life, you need to advocate for yourself in this matter. And ABK makes that easy with their no-cost “fee checker.” You provide the name of your company or the name of your 401(k) plan, and they’ll send you a report showing exactly how much your 401(k) plan is costing you.