Wednesday, September 01, 2010

Signs that your 401(k) is a "clunker": overuse of "retail classes" instead of "investment classes"

Check out this story in Daily Finance, “10 Signs Your 401(k) Plan is a Clunker”, by Daniel Solin, link here.

The most important symptom seems to be #5, “5. Retail share classes are in the plan when institutional classes are available”. A number of 401(k) plans, especially those from some employers, have been criticized for retail classes, which (while gratuitous) charge higher fees and seem to work to the advantage of the employer or financial planner at the expense of the investor.

Other bad signs are too many investment options, and plans dropping in and out of plans.

At work, it’s important to make sure that the money really has been deposited in your plan, particularly if you believe your employer could be headed for financial trouble.

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