Hidden Brokerage Costs
Many 401(k) participants view their plans as no-cost, and it’s easy to see why. Employers withhold money from paychecks and deposit it directly into 401(k) accounts, and all of the money seemingly goes to work. One factor that’s missing in the equation is that mutual funds in a 401(k), just like mutual funds outside of a 401(k), have expense ratios.
These funds cost money to run, so expenses must be deducted from the returns of the funds. This isn’t anything nefarious, or even anything different than funds outside of retirement plans. But participants still need to be aware of them.
