In an interesting article today, WSJ reporter Karen Blumenthal opened up the hood on her 401(k) account to take a look inside. She got some fee information from her plan provider's website, some from a "Summary Plan Description" from her company's HR department, and some from Morningstar. Even after going to three separate places, there was still one fund in her plan that she couldn't get information for.
Hopefully, the new DOL proposal requiring more fee and fund disclosure on 401(k) statements will help reduce, if not eliminate, all the legwork 401(k) plan participants have to do to get fee information.
A few other points of note from the article:
1. This paragraph toward the top of the article is about the relationship between fund expenses and performance.
"In almost every study we've run, expenses show up as a very significant predictor of future performance," says Christine Benz, director of personal finance at Morningstar Inc., the investment research firm. In other words, over time, funds with lower fees are likely to outperform those with higher fees in the same category. By contrast, says Ms. Benz, "our data indicates that past performance is a weak indicator" of future results.
2. The reporter's plan is better than most. Her employer covers many of the administrative expenses, there are index fund options, the expense ratio data (for most of the funds) was fairly easy to find, and the funds had no loads.
To read the entire article, click here.
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