Quinn Curtis, Associate Professor of Law at the University of Virginia. He talks with Les Sinclair about benefits and what to look out for when investing in a 401(k).
Despite recent rules designed to make 401(k) plans friendlier to retirement savers, new research suggests that we’re still paying too much for investment options that are second rate.
“Overall, we find that investors in an average plan pay 86 basis points in fees in excess of low-cost index funds. We estimate in 16 percent of analyzed plans that fees are so high that, for a young employee, they consume the tax benefits of investing in a 401(k),” write Yale Law School professor Ian Ayres and University of Virginia associate law professor Quinn Curtis in a paper shared by the Social Science Research Network.
Any discussion of high fees in 401(k) plans is usually qualified by a statement that plans run by small employers are likely to cost more because they don’t enjoy economies of scale. But Ayres and Curtis reject that, saying, “We find substantial variation in total costs over plans of similar size.”
They also point to two other issues they say shortchange 401(k) savers: