The political season is reaching its zenith with partisan spin galore and the continual entrenchment of political bickering as the new morality. Now that the point-counterpoint-spin cycle has shown to be successful, it was only a matter of time before we see seepage into other industries. Enter the retirement business. Point: The DOL recently released a ruling that mandates disclosure of 401(k) fees. In their words they wanted to give workers “the information they need to make informed decisions, including information about fees and expenses.” Although the idea is novel for a financial product, (i.e. knowing what you’re actually paying,) it would be seemingly hard to see how this could be anything but positive for the consumer. Counterpoint-Spin: Marketwatch publishes an article explaining why fee disclosure might not be a good idea for the consumer. You read that correctly. If you know what you’re paying, that might be bad. Why? Apparently there’s a fear that consumers might not want to be involved with funds that have high fees. Yeah… so? Well, apparently if a consumer makes an educated decision to go with a more appropriately priced fund, then they could be doing major damage to their retirement funds. In the words of Raymond Gay, AIF of Rogers Financial, “Participants should not overreact and make drastic changes to their portfolio or remove money from their 401(k) plan because of the new fee disclosure. The fees are not new to their plan it’s only new in how they are being presented.” Well, yes, that seems to be exactly the point of the DOL ruling. Consumers should know what they’re actually paying, and then act accordingly. Maybe it’s just me, but I find it fairly frightening to entrust your money to an institution which will double-speak you into happily accepting unnecessarily high fees. Way too Orwellian for this side of the pond. Are there any slightly more sane alternatives? Yes. You can avoid retirement-reducing fees by rolling over to a self-directed IRA or Solo 401(k). That doesn’t mean that you have to become a financial guru and make all the decisions on your own. You can still hook up with your favored financial planner and have him/her advise you as a consultant. The few hundred dollars you’ll pay in consulting fees will almost certainly be less than the ongoing fees imposed by the major 401(k) funds. The DOL happens to be on your side this time. Take advantage.
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