Call it a paralysis of analysis. What should be done with old 401(k)s when starting a new job?
Clients and prospects too often don’t know the answer and, as a result, leave it to be gobbled by fees, incompetence and poor performance.
It’s one reason FeeX, a free service that helps investors see and understand fees in their investment and retirement accounts, unveiled its new 401k Rollover Center. FeeX analyzes the fees associated with a user’s inactive 401(k) accounts and tells them whether they are better off keeping their investments where they are, rolling them over to a lower-cost IRA or rolling them into their new employer’s 401(k).
The company notes that more than 53 million people in the United States are saving for retirement in 401(k) plans and millions of people changing jobs each year.
“When starting a new job, many people don’t specify what to do with their former 401k, leaving millions of retirement accounts stranded in limbo—that’s a real problem,” FeeX CEO Yoav Zurel said in a statement.” A 401k is one of the most valuable assets within a retirement portfolio. That is why we created a tool to show investors how much of their hard-earned savings could be leaking out due to excessive fees. We then show low-fee alternatives.”
FeeX cites research that shows fees are highest in smaller 401(k) plans, which have a median annual record-keeping fee of $70 plus an average of 1.27% of assets. By rolling over to an IRA, the annual fee can be eliminated, and the asset-based fee may be reduced to as little as 0.15%. For someone with $50,000 in a 401k plan, this is a savings of about $660 in the first year. Given that fees compound over time this can result in savings of over $83,200 after 30 years, according to the company.
“Crowdsourcing fuels our innovation within the 401k Rollover Center service,” added co-founder Uri Levine. “A 401k plan is comprised of a lot of documents and without access to the fee disclosure, there is no way to provide a tailored recommendation. We let our users upload any documents not already in our extensive database to crowdsource the information. This allows us to provide a more comprehensive 401k fee analysis than anything else in the market.”