Monday, June 05, 2006

Retirement Plan Investment Fees

The Invesmart retirement portfolio cost barometer suggests .58% is a "reasonable standard" for retirement plans to pay for an all equity portfolio while .51% is reasonable for a 60% equity/40% bond portfolio. Their updated study showed the large cap equity fee was .44%, small & mid cap equity .84%, International equity .73%, domestic fixed income .4% and cash alternatives .29%.

If these fees seem much lower than your retirement plan fees you shouldnt be surprised. Invesmark removed finders fees, 12b-1 fees, dealer concessions, shareholder servicing reimbursements and subtransfer agency fees from the fees of the "best of breed' funds they used in the study.

Since many Plan sponsors arent provided with these underlying fees, you might pursue getting this information from your plan provider. An alternative approach would be to calculate your plan's total fees and reduce it by $100-$150 per active participant in your plan. This amount approximates the average cost to adminster a 401(k) plan per participant. This should leave you with the net investment cost, which should roughly correspond to Investmarts estimates. If you are still a long way off from these estimates need to start asking questions and doing some additional due diligence.


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