Tag Archives: 401K

401K Brokerage Firms…..Kinda Like a Bad Charity

After a glorious vacation in Lake Tahoe, it is back to the grind of “life.” We’ve stayed at the same lake property the last 15-20 years.

So, enough of idyllic thoughts and places of retreat from normal life and on to much more exciting ventures!

I was reading (more like paging through) a prospectus from a very large brokerage services company, and their language in the prospectus reminded me of a very bad charity like some portrayed in a recent news report on questionably-run charities that actually give little back to the end users they purport to assist with your charity.

How is a brokerage firm like a bad charity? Certainly, brokerage firms are in the business to MAKE money and not give any away…what is charitable about that? Most of us who have been invested in the market assume that when our 401K or IRA funds purchase Wall Street financial products, that our broker is kinda like that charity in the sense that they will take that money and foster it, grow it, take care of it….all with no selfish interests on their part. I mean, their job is to make us more money, right? Make us more money regardless of how it affects their pocket books, right? Certainly, NEVER doing anything that would not be in our best interests, right? Continue reading

Lose $155,000 from your 401K and Not Even Know It?!

Generally speaking, I do posts on self-directed 401K and IRA options for folks. Many times I go on about the positive aspects of self-direction and do not mention salient facts and statistics about the financial world. Today, is a big exception. This post will surprise many, but it is based on factual data about the fees associated with 401K plans (not self-directed) and how, over a period of your lifetime, these fees can surpass $150,000…or, think of it this way…enough to buy a house or make a real estate investment. That is pretty shocking to say the least.

The genesis of this post was a result of a recent study conducted by Demos which showed how your 401K plan and the fees that are charged to it, will cost the average person $155,000 in fees over the life of the plan. Hard to believe, right? You should review the entire study as it is fairly complicated and dealing with compounded costs over one’s working and retirement years.

What is scary is that in many cases we are talking about fees that most people believe to be minimal….1%. But, the compounded affect over the years is staggering. In fact, while this post sums up some of the more staggering statistics from the study, one should review the entire Demos study. It shows how truly uninformed people are about such fees and how even with the new federal requirement for reporting such fees to employees will, in the end, probably have little true positive affect on truly educating folks on the costs associated with such plans. Continue reading

401K or EIUL?

Written By — David Shafer

History has pointed out that those who sell mutual funds [and stocks in general] tend toward an idealized view of the future that can be rightly called Pollyannaism [having an overly positive view]. While those selling Life Insurance tend to be exactly the opposite, perhaps alarmist in viewpoint. I try to stay in the middle of those two extremes by cementing my strategy into real life experience and data. This “middle-way” will provide the basis for this post.

When comparing two different retirement strategies it is best that we strip away as much of the hyperbole as possible, so I will not demonize those that push either side. 401Ks were originally designed as an avenue to get additional compensation to corporate upper level management. As such it was thought as simply one of many points of compensation, but one that took special consideration about immediate taxation. Long-term tax issues were best dealt with by strategies designed by tax accountants and attorneys. Since those meager beginnings, 401Ks have become the only retirement plans for the majority of workers. Note, that they were not designed to be the majority retirement plans that they have become. So as a retirement tool, they will always be a little off. Most people fund their 401Ks with mutual funds. The mutual funds offered within corporate plans are both limited and have high expenses. In fact, among corporate offered mutual funds the expenses are extremely high, 3% on average. Continue reading