Thanks again to all who commented. I am jealous of the guy with the million dollar 401k! But the average 401k of baby boomers is only $80k, so I’m doing well above average. Also - I agree that SS should never be a sole retirement or comfortable retirement program; I think it serves well as a minimal thing for the poor and a supplement for the rest of us.
One factual detail - the 15% overhead for 401k management comes from various sources: http://www.globalaging.org/pension/us/socialsec/myth.htm says “Administrative costs for Social Security are about 1 percent of benefits, compared with average administrative costs of 12 to 14 percent for private insurers.” I guess that they are specifically talking annuities. But I also watched an interview with Fred Schwed (”Where are the Customers Yachts?”) in which he made a strong case that those who handle our investment money make more than those who invest.
But again - I am a strong proponent of putting the maximum into 401ks! I advise it to everyone. I just think that whatever the salesman says that you will end up with, be cautious and assume you’ll only get half that much.
A Look At 401(k) Plan Fees
http://www.dol.gov/ebsa/publications/401k_employee.html
An excerpt:
Mutual Funds - Mutual funds pool and invest the money of many people. Each investor owns shares in the mutual fund that represent a part of the mutual fund’s holdings. The portfolio of securities held by a mutual fund is managed by a professional investment adviser following a specific investment policy. In addition to investment management and administration fees, you may find these fees:
* Some mutual funds assess sales charges (see above for a discussion of sales charges). These charges may be paid when you invest in a fund (known as a front-end load) or when you sell shares (known as a back-end load, deferred sales charge or redemption fee). A front-end load is deducted up front and, therefore, reduces the amount of your initial investment. A back-end load is determined by how long you keep your investment. There are various types of back-end loads, including some which decrease and eventually disappear over time. A back-end load is paid when the shares are sold (i.e., if you decide to sell a fund share when a back-end load is in effect, you will be charged the load).
* Mutual funds also may charge what are known as Rule 12b-1 fees, which are ongoing fees paid out of fund assets. Rule 12b-1 fees may be used to pay commissions to brokers and other salespersons, to pay for advertising and other costs of promoting the fund to investors and to pay various service providers to a 401(k) plan pursuant to a bundled services arrangement. They are usually between 0.25 percent and 1 percent of assets annually.
* Some mutual funds may be advertised as “no-load” funds. This can mean that there is no front- or back-end load. However, there may be a small 12b-1 fee.
* Target date retirement funds, which are often mutual funds, are designed to make investing for retirement more convenient by automatically changing your investment mix or asset allocation over time. Different target date funds may charge different fees even if they have the same target date. If a target date fund invests in other mutual funds, fees may be charged by both the target date fund and the other funds.