Is your 401(k) plan a rip-off?

Jim_SamsonNot all things are equal. That’s a lesson we learn time and time again as we progress through the game of life.

And we can normally tell when we’re getting a raw deal. For example, if you see you’re about to buy a refrigerator for a certain price, you can simply check online to see if it’s a fair or bad deal.

But other things aren’t quite so clear, like your 401(k) plan. Are you getting ripped off? Here’s how to tell…

401(k)s can be complex, and you may have a hard time understanding whether or not yours is a horrible deal considering that every employer can customize their own plan.

And it all revolves around your expenses when it comes to your 401(k). The higher the expense ratio of your plan, the more you’re losing out on…

The fund manager for your 401(k) fund shouldn’t be taking more than 1%, especially considering you can buy mutual funds for less than .2% each year.

So first things first – try to compare the plan for the company you work for against a similar company’s plan. If you work for a company offering a plan with $4 billion in assets, try to identify a plan with close to that amount.

See where your plan stacks up against the other one in regard to average cost for standalone mutual funds and for target-date funds.

This will be a pretty good indicator of whether or not you’re getting ripped off with your 401(k). You might even be amazed by the vast differences there can be from plan to plan.

If you need help finding similarly sized plans, check out Brightscope. You can also see overall ratings for 401(k)s here.

Of course the next step after finding out your 401(k) plan is a rip-off is to do something about it. Talk to your employer and bring your findings to their attention. They may not even realize exactly how the plan they offer compares to others.

And it’s worth noting that employees have sued companies before on the grounds that they’re getting overcharged in their 401(k) plans. They we’re getting ripped off…are you?

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