Top 3 Expenses You Didn’t Know Your 401(k) Paid

Top 3 Expenses You Didn’t Know Your 401(k) Paid

It’s important to understand expenses when determining the right investment vehicle. Untangling the web of payments and vendors for a 401(k) plan can be complex for industry insiders, let alone business owners and participants. A few examples are;

1. Mutual Fund Expenses
Fully disclosed, they compensate the mutual fund company, the Broker or Investment Advisor who helps the plan, and offset expenses for the fund company.

2. Commissions within the Mutual Funds
Not disclosed, these are the commissions that the mutual funds pay when they purchase the underlying stocks or bonds within the fund. This cost is borne by participants through lower fund returns.

3. Soft Dollars
A contentious subset of the above category, it is the commission that the mutual fund chooses to pay a Broker Dealer above the market rate. It is then rebated back to them in the form of research.