Should the Federal Government compete with the private sector to bring down the fees for managing 401k programs?
One of the biggest untold scandals is the transition from pensions to 401k plans, a gold mine for Wall Street investors taking advantage of over $3 trillion flowing into equities and all the managerial fees involved with those investments.
The Federal Government might get involved here and offer Americans at minimal cost the ability to have an investment in 401k funds without paying the management fees. Most Americans have no idea how much they lose in their old age to the fees associated with the life time management of their funds.
Here is how it would work in practice: The IRS could issue a set of guidelines with a chosen “ideal” investment portfolio for your age and income at a cost of say $100/year. Each investor could check off if they wanted an email informing them when IPO’s were issued, what percent of large cap and small cap stocks they wanted to invest in, etc.
You would have the opportunity to pick your own stocks or have the IRS pick the stocks for you at random once a year with a minimal charge if you request a change mid-year.
The average American family would save almost $150,000 in 401k fees when they retire.
At a bare minimum we need absolute transparency in the 401k plans so that the consumer knows exactly how much they are paying for others to manage their money.