Burton Malkiel, Charles Ellis and Jay Vivian Join Rebalance IRA Investment Committee

Nearly Half of Americans Surveyed Falsely Think They Pay Zero Retirement Investment Fees

October 15, 2014
Palo Alto, Calif.

National poll of baby boomers reveals widespread misconceptions about retirement account fees.

A new survey commissioned by retirement investment advisory firm Rebalance IRA finds that many full-time employed baby boomers do not have a clear understanding of the fees they are paying in their retirement accounts. When asked what they pay in retirement account fees, 46 percent believed that they do not pay any fees at all. A further 19 percent suggest that their fees are less than 0.5 percent. Only 4 percent of those surveyed believe they pay over 2 percent in retirement account fees.

In fact, everyone who has a retirement savings account, such as 401(k) or IRA, pays fees. According to a recent 401(k) Averages Book, the average employee had various fees of 1.5 percent each year deducted from his or her 401(k) account. Smaller plans with the highest fees averaged nearly 2.5 percent and were as high as 3.86 percent.

Rebalance IRA’s survey of 1,165 full-time employed Americans aged 50-68 suggests that, despite a rule by the Department of Labor that went into effect in 2012 requiring plan sponsors to provide greater transparency about fees, there remains a great deal of confusion among consumers.

“These fees are not trivial. Over time, these seemingly small fees will compound and can easily consume one third of investment returns, yet a lot of people don’t believe that this problem applies to them,” says Mitch Tuchman, Managing Director of Rebalance IRA, which charges a 0.5 percent advisory fee and prominently displays this fee on its website and in other materials. “Decades of research show that low fees are the top predictor of investment success. My hope is that those of us on the side of lowering client fees will eventually win out, but these survey results were an eye-opener – consumers clearly have a long way to go.”

Professor Burton Malkiel, author of the classic investing book A Random Walk Down Wall Street and member of Rebalance IRA’s Investment Committee, agrees. “Fee obfuscation has been around as long as there have been fees, and this survey is proof that the industry is still winning the battle,” says Malkiel. “I do believe we are seeing more options out there for people who want lower fees and better service. The trick now is to make people realize the truth of what they’re really paying because I can guarantee that whatever it is, it’s not nothing, and it is likely to be substantial.”

For those who need help figuring out exactly what they pay in retirement account fees, Rebalance IRA has template emails available on its website: http://www.rebalance-ira.com/401k-ira-fees/.

Investment Returns, Anxiety Levels and Other Survey Findings

  • Respondents stated an average return in 2013 of 5.2 percent but the target benchmark indexes were up 9.5 percent, meaning their retirement investments underperformed by 4.3 percent. Yet more than half of respondents, 55 percent, reported that they were satisfied with their returns.
  • Twenty-eight percent of full-time employed baby boomers surveyed are not actively saving for retirement.
  • Two-thirds (66 percent) of respondents describe themselves as either very anxious or somewhat anxious about their readiness to retire with enough money.
  • Twenty percent of those surveyed did not know what percentage of their portfolio is currently in stocks or stock funds.
  • Forty-four percent of those surveyed said that if they could go back in time, they would learn more about investing. Sixty-seven percent said they would contribute more to their retirement accounts.

Survey Methodology
This online survey of 1,165 U.S. adults, aged 50-68 and working full-time, was commissioned by Rebalance IRA and conducted by AYTM.com. The survey has a 3 percent margin of error and a 95 percent confidence level. All data is self-reported by study participants and is not verified or validated. Respondents participated in the study between September 12 and September 18, 2014. Detailed findings are available by request.

About Rebalance IRA
Rebalance IRA is the only national investment firm focused on helping mass affluent baby boomers fund their retirements by managing client assets with the proven methods of the top professional endowment and pension fund managers. We help our clients retire with more money by growing their savings in the fastest, safest way possible. Rebalance IRA accomplishes this by reducing client fees an average of 52 percent, and combining low-cost, proprietary retirement portfolios with a dedicated investment expert for each client. The Rebalance IRA Investment Committee consists of financial industry luminaries Professor Burton Malkiel, Dr. Charles Ellis and Jay Vivian. For more information, visit www.rebalance-ira.com.

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