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Call What’s with the constant focus on any kind of metaphor for expenses? Drip. Leak. Leakage. Evaporation. Etc.
I’m more worried about those who end up with a low cost account full of nothing because they were too frightened to put any money into a 401(k) Plan.
Don’t get me wrong. Yes. Plan sponsors need to pay MUCH closer attention to what their plan is costing their participants. Yes. Participants need to pay MUCH closer attention to what’s going on in their account. Yes. Shining a light on expenses is good for competition and efficiency. But at what cost to the individual who only hears negative remarks about 401(k) plans?
The 25 year old employee who decides to forgo his weekly trip to the movieplex and his daily Grande Frappacino, and put that amount into an expensive, low earning 401(k) plan is going to have infinitely more money than the 25 year old who sees every movie on opening night and has his standing order ready every day at the local FiveBucks.
At the risk of repeating myself, let me repeat myself. Expenses, costs, fees, commissions, soft dollars, hard dollars, style drift, etc. all need to be paid attention to. But not at the expense of young employees saving absolutely nothing.
Speaking of helping people get ready for retirement. We were just able to help a 3-generation business with a 401(k) plan that that puts 95%+ of the contribution in the accounts of owners. Yes. To do this the rank and file staff had a sizeable contribution made in order for the owners to get 95% of the total. But. 95% of the total. I think that’s a good plan design.
