Retirement Income Journal
The information forum of the decumulation industry.

To what extent do mutual fund fees undermine Americans’ attempts to save for retirement?

Cost-conscious investors have long observed that while mutual fund management fees may represent only a tiny fraction of an individual investor’s account balance, they often constitute a sizable portion of the individual’s returns—especially when those returns are low.

It’s also been widely observed that expenses can reduce cumulative returns over an average investor’s lifetime by tens of thousands of dollars—and that the reductions can frustrate even the best-laid plans to amass enough savings for retirement.    

With increasing scrutiny of 401(k) plan fees, which tend to be  smaller at larger plans and vice versa, and with the Department of Labor deadline for full fee transparency only about five months away, the fee question has rarely been as widely discussed as it is now.

As it happens, Stewart Neufeld, Ph.D., an assistant professor at the Institute of Gerontology at Wayne State University in New York, addresses that question in the current issue of the Journal of Financial Planning and recommends that plan investment fees be cut to the price of an ETF fund, or no more than 10 bps a year.