Here’s Why You Should Read Your 401K Fund Documents and Save Tens of Thousands of Dollars Over the Decades

Boring Can Be a Cover for Being Fleeced

Rather have a root canal than read your 401K enrollment forms?

Not so fast! Unlike a root canal, you can turn dread into money. Just hack your way through all the finance-speak and you’ll find all the hidden ways you’re being pickpocketed.

I know.

After 30 years on Wall Street, I can separate facts from financial B.S. faster than a mugger can say “hand me your wallet.” So I read my pal’s 401K documents for fun and discovered an interesting con:

The plan’s age-based fund lineup was prominently featured, for which you cough up another 0.25% in fees. Translation: you pay a quarter of 1% FOREVER for a curated list. If you’re 25-years old, you would be buying someone’s current fantasy football lineup and paying for it for 40 years.

This would cost you tens of thousands of dollars over time.

No extra value was provided. Just the list. No reasons why these funds were picked or justification for the bizarre asset allocation.

This was a grandma portfolio, crazy conservative for a 25-year old’s 401K. The lineup included 20% in Short-term US government bonds, 10% in consumer staples, and only 10% in non-US stocks.

By contrast, similar funds from Fidelity, Vanguard, and T. Rowe Price were all invested much more aggressively and didn’t have a cash equivalent (Short-term US Gov’t Bonds), much less at a 20% weight.

A young person’s portfolio should be more volatile — time gives them the luxury of weathering crappy markets.

Keeping 20% of their money in a cash equivalent is going to cost young participants a FORTUNE in foregone returns.

So the real crime is not the 0.25% surcharge, but investing 40-year money in a cover-your-ass, loss-avoidant portfolio, presumably not to upset people, even if it’s to their detriment and to your 0.25% a year gain.