One common labor union objection to defined contribution pension plans (401-k plans) is that the administration costs are “1%-3%” annually. They assert that it’s much less expensive to let CalPERS or other “experts” manage a huge pooled account.
And indeed that high 1-3% individual account annual cost would be a major impediment. IF it were true.
It’s not. Not if one makes even a rudimentary effort to control costs down to 0.2%. And in some cases, the cost can approach 0.1% a year.
No, not 1% a year. That’s ONE-TENTH of ONE PERCENT annually –TOTAL cost. And it can be even less.
Furthermore, the employer — public or private — can make and set such cost limitations for the employees. There are sensible restrictions the employer can suggest to avoid the gambler’s tendency to figuratively bet on the lottery with their pensions.
Let me add that the advice contained below is readily available for ANY investor — IRA’s, 401-k plans or just brokerage account investing of personal investments. Everyone should at least be aware of this option.
The “trick” is… Read More