Don't make this mistake with your old 401(k).
A new opportunity beckons, across town or across the country. Cake is consumed and co-workers hand you a card scrawled with cheerful goodbyes. Your boss says she’ll miss you but wishes you well.
For instance, a person with $50,000 in a 401 with a plan fee of 2% pays $1,000 a year. In comparison, a plan fee of 1% — typical at large companies — costs that person just $500 a year.Compounding cost As your retirement plan balance goes up over time, so does your cost of being in the plan. A near-retiree with $250,000 in a high-fee 401 plan shells out $5,000 a year for exactly the same service as a first-year associate.
Just as money grows with compounding, so does the impact of fees. If you invested $100,000 one time and left it for 20 years at a market return, you should expect a balance of just over $400,000 at the end of that period. Unsurprisingly, most 401 plans make it incredibly hard to estimate their “all in” costs. There are fees from the plan itself, fees for mutual funds inside the plan, then more fees nested inside those funds.A secure retirement If you have access to a 401, that’s great. You get automated saving and investing, a great tax break now, and, in most companies, free matching funds from your employer. As long as you work there and get the matching money, go ahead and take advantage of these benefits.
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