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401k Comes With Fees

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More and more employers are no longer offering a pension plan but rather a 401k, which has helped it balloon into a multi-billion dollar business. However, most of that money isn't always going to those paying into it.

I sat down with the Founder of Cornerstone Retirement, Chris Abts for this week's Face the State.

Abts said 70% of 401k contributors don't even know there are thousands of dollars in hidden fees that investment companies pull out of your retirement for managing your account.

"The average, married, working couple both contributing to some type of 401k plan can expect to pay or contribute more than $150,000 in fees during their working years."

Those hidden fees are usually about 2.5% compounded over the term of your plan. That 2.5% compounded over 40+ years of working and you are talking about a lot of money being taken off the top.

So, your 401k quarterly statement doesn't tell the full story.

Abts said this past year because so many people were being left out of the loop the U.S. Department of Labor started requiring investment companies to tell you about these hidden fees, which is a good thing.

Also, remember, after those fees are taken out, the money that you get is taxed and if you want to take it out early, your employer, by law, must hold onto 20%.

"If you go directly to your 401k or retirement plan and ask for those funds, they're required to withhold 20%. That money is taxable and the IRS wants to make sure they get their share come tax time."

You can watch my entire interview with Abts this Saturday at 4:30am and Sunday at 6:30am on Face the State.

Written by Chris Ciarlo

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