How to Avoid Getting Ripped Off By Your 401(k) Plan

Approximately 51 million Americans have invested an estimated $3.5 trillion in 401(k) plans, according to the Investment Company Institute. If you’re one of them, you’re probably being ripped off, big time.

How? Your plan likely includes a dizzying array of investment choices. These options are dominated by funds that have high management fees and are actively managed, in which the goal of the fund manager is to beat the returns of an index, like the Standard & Poor’s 500 index.

A February 2014 paper by Ian Ayres and Quinn Curtis, “Beyond Diversification: The Pervasive Problem of Excessive Fees and Dominated Funds in 401(k) Plans,” provided sobering advice for plan participants. The study looked at more than 3,000 401(k) plans with more than $120 billion in assets. It found that fees were so high (compared with an index fund) in 16 percent of the plans that, for young employees, these fees consumed “the tax benefit of investing in a 401(k) plan.”

Read the rest of the article at US News.