A funny thing struck me as I sat there, live, on the CNBC setduring “Closing Bell” for a quick banter about “high” 401(k) fees:In the end, retirement plan fees are a lot less important thansaving to the plan. This concept is similar to what a 2012 Whartonstudy showed: Of the four factors analyzed, investment allocationwas less important than the three savings components (when youstart, how much you contribute, and when you retire).
We've heard of the “tragic” impact an extra 1 percent of feeshas on your retirement savings. While derived using mathematicallyvalid formulas, this hypothetical number misses the point. Itrepresents the moral equivalent of complaining about paying halfyour lottery winnings in taxes. (e.g., why would a “$1 million”winner complain about having to pay $500,000 in taxes when they'restill $500,000 richer than they were before they won?)
Don't get me wrong. This is not lame justification for high,inappropriate, or conflicted fees. It's just that most reasonablepeople already agree plan sponsors should avoid these types offees. But, at this point, the “high” fee discussion has devolvedinto some sort of modern day version of arguing how many angels candance on the top of a pin. Not only are the numbers we're talkingabout small, but the debate misses a more important point.
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