Over your lifetime, the guys who run your 401(k) have the potential to eat up nearly $155,000 and consume nearly one-third of investment returns, a new study by the nonpartisan research group Demos has found.
And that’s just for an average family. The figure is even greater for high income households—$278,000, the group found.
“Because these fees are taken ‘off the top’ of investment returns or share prices, account holders generally have no idea how much all of this is costing them,” the group concluded.
While the average mutual fund earns about 7 per cent, post-fee returns average only 4.5 per cent, “meaning that, on average, fees eat up over a third of the total returns earned by mutual funds.”
Here’s Demos’ nifty graphic showing how the fees break down:
And here’s the ugliness, in graph form:
For what it’s worth, mutual fund industry representatives have disputed the findings, according to the LA Times.
“There’s a problem — I’m not quite sure the problem is as large as stated,” Mike Alfred, chief executive of BrightScope Inc., a San Diego company that analyses retirement plans, told the Times’ Walter Hamilton.