Participants in 401(k) plans are “largely unaware” of fees that they pay, according to an AARP report based on a survey conducted by the organization.
The survey found that 71% of participants incorrectly said they didn’t pay any fees and 6% said they didn’t know whether they paid fees, the report said.
“Americans are trying to plan for their retirement without all the information they need about their 401(k) plans,” Jean Setzfand, AARP director of financial security, said in a news release describing the survey. “The research shows a clear lack of understanding about 401(k) fees and the impact they might have on one’s saving.”
And even when participants were told that they do pay fees, AARP found that most weren’t aware of the amounts they pay to maintain their accounts, according to the report. “Participants may not have a clear understanding that there are fees associated with their plans,” the AARP report said.
When participants were told that companies charge fees for managing and administering 401(k) plans, the AARP report said 62% are “unaware of how much they are paying in fees and expenses for their plans.”
The latest survey, released Thursday, doesn’t show much improvement in participants’ understanding of fees compared to an AARP survey conducted in July 2007. In that survey, 65% of participants said they didn’t pay fees for their 401(k) plans while 18% said they didn’t know whether they paid fees.
“Nevertheless, after being told that 401(k) plan providers often charge fees for administering their plans and that these fees may be paid by either the employer that sponsors the plan or the employees that participate in the plan, the vast majority (83%) of respondents acknowledged that they do not know how much they pay in fees,” the 2007 report said.
The latest survey of 803 401(k) plan participants was conducted by telephone in December with U.S. residents age 25 and over, AARP spokeswoman Tiffany Lundquist said in an interview. The 2007 survey covered 1,584 participants in the same age range, according to the 2007 AARP report.