No. of Recommendations: 13

You wrote, Truth be told, that's not bad at all as it puts you at .23 - .25%. Think of all the folks who have plans that contain only choices of funds with higher expense ER fees that are over 1%?

TL;DR: anecdata follows.

I once worked at a start-up that had a 401(k) plan through John Hancock. This was before Congress required full disclosure on your statements. The plan's fees were atrocious.

If you actually read the fine print of the plan summary and disclosures, the details were actually there. John Hancock was collecting 1%/year from us on top of the outrageous expense ratios and 12b-1 fees charged by the funds. I created a table of the available options and found that the average offering cost employees right at 2% of assets/year.

The cheapest options were the money market account and the US large cap index fund - it didn't actually claim to be an S&P 500 fund, but that was its benchmark. I think the index fund still came with something over a 0.25% expense ratio, for a total cost of over 1.25%/year for just an unmanaged S&P 500 index fund.

When I confronted management about the costs, I was was met with this response: Yeah? So? I'm making money in my account. Aren't you?

I maxed out anyway, because I figured I needed to defer as much of my income as possible. Even though I figured the plan was basically eating up most of the value of the tax deferral - I also figured I wouldn't be there forever and it would be a good move once I managed to move those assets to my IRA. When the company folded during the credit crisis, I quite literally faxed the rollover paperwork to John Hancock on my way out the door.

- Joel
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