RENEE MONTAGNE, HOST:

In the private sector, many workers sock away money for the future using 401(k)s or similar company sponsored retirement savings plans. It would be fair to say that most - and even some of their companies - don't know how much they pay in fees for these plans.

The government is trying to make it easier for people to see what's being eaten up by administrative and other fees.

As of July 1st, companies that offer 401(k)s will have to disclose more information about them.

For details, we reached Mary Beth Franklin. She's a contributing editor at InvestmentNews, a weekly newspaper for financial advisers.

Good morning.

MARY BETH FRANKLIN: Good morning, Renee.

MONTAGNE: These fees, are they big enough to put a dent in what you're getting out of your 401(k)?

FRANKLIN: Oh, absolutely. Fees take away from the accumulated savings of your lifetime. The Labor Department has a wonderful, easy to read, report explaining about fees and what to look for. And their very conservative estimate of assuming you have $25,000 in your 401(k) account and you have 35 years before you retire. And if your fund is returning about seven percent and your fees are half a percent a year, you will end up with about $227,000 35 years from now.

If your fees were 1.5 percent a year, a one percentage point difference, you would end up with $163,000 versus that $227,000. That's a 28 percent difference.

MONTAGNE: That does sound - that's a surprising amount of money over the long term. But a recent report by the Government Accountability Office, the GAO, found that half of employers who sponsor 401(k)s didn't know if their employees paid these fees. And they mistakenly thought that the fees were waived. Why is there so little knowledge about these fees?

FRANKLIN: Because frankly, you know, if the employer is in the business of making widgets, all he wants to do is make widgets, and he's offering the 401(k) plan as a way to attract and retain employees, and wants to offer a good plan but as cost-effective as possible. And if a financial services company comes to him and say, oh, we can set up this whole plan and it's not going to cost you anything, he may take that at face value. But various commissions and load fees and administrative fees may be woven into the cost of the plan, and they're not apparent.

MONTAGNE: What recourse do employees have if they examine the charges and do think they're too high? Can you really do much with your 401(k)?

FRANKLIN: Not on an individual basis. You can't just opt out and say, OK, I just want a whole new lineup of funds. The 401(k) is offered for the benefit of all the employees. But that would certainly start some water-cooler and cafeteria conversations, I think, to go to the employer or to your 401(k) investment committee, whatever, and saying, hey, this is a lot more than we thought. Can you take a look at our plan and see if we're getting the best deal for our money or are there lower-cost alternatives?

Now, some people worry that a negative impact of this could be employees could look at this statement and say, wow; I'm paying all of this in fees. What's the point? I'm not even going to save anymore. Frankly, I don't think that's going to happen. I hope that doesn't happen. I hope this becomes a tipping point for a real conversation about our retirement system. People are realizing they have to be more responsible with their own savings, but employers should give them the opportunity to get the biggest bang for their buck.

MONTAGNE: Thank you very much for joining us.

FRANKLIN: Thank you, Renee.

MONTAGNE: Mary Beth Franklin is a contributing editor at InvestmentNews.

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