Tips for Latinos Planning Their 401(k)


For Latinos seeking future financial security through a 401(k) plan, it is important you know what fees are incurred during the process.
It is important for your financial security to be aware of charges accruing over the years, especially since retirement funds accumulate for decades and so do those fees,” a report from Fox News Latino said.
However, many Latinos may not fully understand the workings of their plans. Recent data from a NerdWallet investing study found that up to 92.6 of participants in their survey had underestimated the amount of fees they paid over the course of their plan.
According to the report, the following fees can be expected during your 401(k):

Expense ratio: This is a measure of the fund’s total annual operating expenses and is the most common fee you will encounter. This may be the most prominent fee but it is certainly not the only fee. This fee should be clearly noted on your fund statement because it does not vary much year-to-year.
Other mutual fund-level fees: Other costs could include purchasing a fund and associated trading costs. These fees should be displayed prominently on your 401(k) statement as well.
Plan-level fees: These fees pay for plan providers and administrative costs.

The report also recommends controlling fees by picking funds with low expense ratios, comparing and ranking 401(k) fund offerings, and identifying and understanding hidden fees.
According to author and financial analyst Neda Jafarzadeh, heed the following tips to determine whether your mutual fund fees are excessive:

– Research index funds with low expense ratios. This will cost you less money in fees over time than investing using actively managed funds which on average have higher expense ratios.
– If your research shows that the 401(k) funds in your retirement package that are all from the same fund family are performing poorly, you may want look for another plan trustee.
– Not all no-load funds have the same terms, so research your specific terms so you understand what you have signed up for. FINRA allows a fund to charge up to 0.25 percent of its average annual net assets in 12b-1 fees and still call itself a no-load fund.

(Photo by kenteegartin via Flickr)