Participants Want Help Understanding 401(k) Fees
The majority of respondents to a recent survey by AARP expressed a desire to have a better understanding of the long-term impact of fees. The majority of participants (77%) said they would rather receive fee-related information on paper. Other disclosure methods preferred included: the Internet (30%), in-person group sessions (24%), and one-on-one counseling (23%). Respondents said they would want to receive fee information before they choose their 401(k) investments and on a regular basis thereafter.
Those who view fees as important were most likely to cite summary information (48%) as the resource they turn for information about fees, followed by prospectuses (35%), employer-provided financial advisers (23%), personal financial advisers (17%), and the Internet (19%).
In addition, according to a report on the survey findings, more than half (54%) of participants surveyed said they do not feel knowledgeable about the impact fees can have on their retirement savings. In spite of these results, nearly eight in ten (79%) plan participants who make decisions about their 401(k) investments noted that fees are an important consideration in their decisions.
When asked who should be most responsible for ensuring that participants understand fees charged by plans, participants surveyed were most likely to say employers that sponsor plans (36%), followed by the financial services companies that administer the plans (32%), and 401(k) participants themselves (28%).
An encouraging finding from the survey was that many respondents appear to sense that fees can have a significant effect on their returns, the report said. When asked to choose between two funds with identical characteristics except for the expense ratio, the majority of respondents selected the fund with the lower expense ratio.
AARP commissioned the nationally representative survey of 1,584 401(k) plan participants ages 25 and older. The survey was fielded from June 8 through June 24 by Knowledge Networks of Menlo Park, California, to members of its online panel.
The full report of survey results is here.