WASHINGTON – The Pension Rights Center applauds Congressman George Miller (D-Calif.) and Congressman Rob Andrews (D-NJ) for introducing the 401(k) Fair Disclosure for Retirement Security Act of 2009. At a time when the decline of the stock market has decimated 401(k) plans, it is more evident than ever that every dollar counts – and workers need to know the fees and costs associated with their 401(k) plans. Workers need to know not only how much they are paying in fees, but also what these fees are paying for in the plan. 401(k) fees can significantly reduce the amount workers are able to save for retirement. A recent Government Accountability Office study found that for every one percent increase in the amount of fees workers pay in their 401(k) plans, their retirement savings could decline by as much as 17 percent over a 20-year period.
“Workers need to know that fees eat away at their 401(k) balances,” said Pension Rights Center policy director Karen Friedman. “Addressing this issue will help to ensure that workers are getting their money’s worth for their 401(k) investments.”
Workers are not the only people affected by 401(k) fees. Often the employers making decisions about which service provider to select to manage their retirement plans have no idea the amount of fees and costs associated with their plans. In order for plan decision makers to make well-informed selections, they must be able to compare the fees charged by various vendors.
While the fees associated with 401(k) plans can eat away at an individual’s retirement savings, they are just one of the many inadequacies in our nation’s patchwork retirement system. 401(k) plans were never intended to be the sole source of retirement income aside from Social Security. This is why 401(k) plans are woefully inadequate in preparing workers for a secure retirement.
“It is time for policymakers to take a hard look at the nation’s retirement system and ask whether it works or if we need something more,” said Friedman. To address this question, the Pension Rights Center has joined with the Economic Policy Institute, the National Committee to Preserve Social Security and Medicare, and the Service Employees International Union to launch Retirement USA, an initiative to develop a new future retirement system that provides a universal, secure and adequate retirement income for American workers.