The vast majority of 401k providers selling 401k administration and investment services to small American businesses are surreptitiously charging plan participants 401k AUM fees. “AUM” stands for “Assets Under Management,” and represents your total 401k retirement savings. If you have saved $50,000 in your 401k, a 1.5% AUM would equal approximately $750 per year going into the pockets of financial planners affiliated with your 401k provider. That could easily represent one month of your total 401k contribution.
Most 401k participants do not know they are being charged 401k AUM fees. According to the Investment Company Institute, a non-profit organization of all mutual fund providers in the USA, and also reported on CNBC, 401k AUM fees for small American companies are about 1.5% annually. Larger companies negotiate lower AUM fees, but small businesses are essentially screwed. Their only recourse is 401k participant-initiated litigation, finding a 401k plan provider with ultra-low AUM fees, or better yet, no 401k AUM fees. We are in the second group of 401k providers, with NO 401k AUM charges or fees. We have guaranteed no 401k AUM fees for the past 35+ years we’ve been in business.
If you do not like the idea of someone skimming off your 401k savings and pocketing your money, talk to your HR department, or employer about it. The employer, not the employees, should be the sole entity paying for the company’s 401k.