Is your 401k a total scam? Let me start off by saying that 401(k) plans, at least on paper, are a great deal.

You get tax-deferred savings today and tax-deferred growth for decades to come. Everyone should have one and too few people take full advantage of them.

Yet they also remain one of the most egregious scams in modern finance. The reason is fees, stacks of needless charges piled willy-nilly, one on top of the other. Expensive mutual funds are finally ceding ground to index funds and ETFs, leaving 401k management fees as the last great rip-off in retirement saving.

Their days are numbered, thankfully. The U.S. Department of Labor  is now phasing in rules that force the funds to admit what they are charging American workers for the privilege of handling their retirement savings.

While it wont be easy sledding to figure out if youre being scammed by your employers choice of fund administrator, it is easy to find examples for comparison. The very best 401k plans in America  these days charge clients on average 0.29%.

Thats the result of the latest BrightScope survey of corporate retirement plans of greater than $1 billion in assets. The fee figure is an average of the Top 30.

Being big helps a lot. Large plans with thousands of participants often can afford to cut fees because of the volume. On the other end of the scale, a small plan with less than $10 million in assets and a few dozen participants might charge 1.45% or more.

What that means in practice is that for every $1,000 invested, the small-plan participants must pay $14.50 in management fees every year. They dont get access to better investments  or particularly wise counsel. It just costs more.

The impact of a 1% difference is truly significant. The Department of Labor explains it this way. One worker with 35 years until retirement puts $25,000 into a retirement account and earns a market average of 7%. She pays fees equal to 0.5%.

Another the same age does the same thing but pays fees of 1.5%.

How does that work out? The first worker enters retirement with $227,000. The second has just $163,000 — roughly one-third less money!

A small number of money managers might be worth the premium they charge, at least in the short run.

Over the long term, however, reversion to the mean tends to reduce even that slim advantage. The financial landscape is littered with the wrecks of formerly high-flying funds and their star managers, many of whom retire and leave the industry just in the nick of time.

Is your 401k a total scam? Ask

How many of these stars work for your tiny 401k plan? Zero. The pay is too low and the work is too hard.

For the rest of us, pricey management in a company 401k is like buying the very smallest size jar of peanut butter in the grocery store. On a per-ounce basis, the price is ridiculous compared to the family-sized container at the bottom of the shelf.

Its the same peanut butter, though. When you get your 401k statement, look up your expense figure or ask your administrator to show you. If the number isnt what you expected, make some noise. Your retirement is at stake here .

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