On the subject of 401Ks – We’ve got some good news, and some bad news.

We’ll start with the bad news: According to Morningstar “a 401(k) plan is one of the very few products that people buy that they have no idea what it costs.”

I also mentioned there was good news: According to a new Investment Company Institute Report 401(k) participants paid an average expense ratio of 0.54% of assets for equity mutual funds in 2014 (down 30% from 0.77% in 2000). High investment fees can erode your retirement nest egg in a hurry, so this is a positive trend. Still, 12% of 401(k) mutual fund assets are invested in high-cost funds, with fees of 1% or more, ICI found. We’re on the right path, but there’s plenty of room for employer and investor education surrounding fees.

Do you ever feel that the expense ratio for your large-cap index fund is a tad high? It could very well be padded with revenue sharing fees. Usually a mutual fund will pay service fees (in addition to 12b-1 fees) back to the transfer agent or custodian. So assets invested in a particular type of fund pays a fee back to the service provider for the 401(k) plan. This poses a problem because it encourages service providers to choose the funds from which they will receive commissions.

Although investing in a mutual fund may promise high returns, the hidden fees that are associated with these investments are usually not worth the risk. Returns are always uncertain, while fees are a sure bet. Working with a financial advisor who operates as a fiduciary will eliminate these unnecessary fees and other hidden costs. No surplus in return that a skilled mutual fund manager will promise can make up for the high fees that come as well. A smart investment plan will take both fees and appropriate returns into consideration.

In the end, the cost of a retirement plan is just one piece of the retirement puzzle, and fees are only one consideration out of many. Some of the most salient influences on a retirement nest egg include the rate of return, the amount of time the money is in the market, and the amount saved over the years. Working with a financial advisor that services you as a fiduciary should be a preliminary step when planning for your retirement.

This commentary on this website reflects the personal opinions, viewpoints and analyses of the Gainplan LLC employees providing such comments, and should not be regarded as a description of advisory services provided by Gainplan LLC or performance returns of any Gainplan LLC Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Gainplan LLC manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results