401k Secrets You Need to Know

Many people invest their money in 401(k) plans. In fact, these are one of the most popular and trusted ways of saving among American citizens. However, a lot of people are unaware of how, exactly, these plans work, and that’s not a good thing.  

It’s important to understand how these plans work, as well as to be aware of some of the lesser-known “secrets” about them.

The Separate Account Charge Secret

Did you know that you may be being charged a separate account charge for your 401(k)?

Typically, you have to pay this fee (which is often carefully hidden) if your plan is owned by a life insurance company. Even worse, this is no small amount. It’s often as much as 1.25%.

The charge can go by many names, including:

l  Group variable annuity

l  Mortality & expense charge

l  Variable account Charge

If you find you’re paying this fee and you don’t like it, talk with your financial adviser about switching to a 401(k) plan that doesn’t make you pay this unfair fee.

The Revenue Sharing Secret

Look out for revenue sharing happening on your account. This is when money is getting shared among your service providers.

Unfortunately, when revenue sharing starts happening, it often means that you will be steered toward risky, high-cost investments. It can also indicate that you’re likely to pay higher than average administration fees.

It can be hard to tell when revenue sharing is happening, so, if you have questions or concerns, have a trustworthy financial adviser, one not directly connected to your 401(K), to look over it for ou.

As you can see, 401(k) accounts can be tricky and sometimes even misleading. With the right financial help and guidance, however, you can discover their secrets and make your knowledge work for you.