401(k)s and costs to savers
Re “Fees Eat Away at Employees’ 401(k) Nest Eggs,” one in a three-part series, April 23
Thanks for the articles explaining the various costs to employees when employers use a system that is riddled with conflicts of interest to select 401(k) plan consultants, administrators and fund managers. The ultimate conflict of interest is that boards of directors, at corporations with publicly traded stock, have an incentive to cause their employees to pay greater fees than necessary to fund managers who, should the occasion arise, are expected to vote their proxies to entrench members of those same boards of directors. It is another mechanism by which boards of directors avoid accountability.
LES GREENBERG
Chairman, Committee of Concerned
Shareholders
Culver City
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If employees are surprised at the fees assessed on their 401(k) accounts, they are in for their second big shock when they retire and roll it into an IRA with a bank. They are going to discover fees for installing and maintaining the account, and big fees if you close it or roll it to another institution. If you have more than one IRA with the same bank, you get to pay fees on both accounts. If you think that doesn’t put a hole in your interest, think again.
When IRA’s were established, it was unconscionable for a bank to attach fees. Wasn’t this our way to retirement? I wrote to the banking commission, the controller of currency and the president protesting this. I was told that banks are private institutions and could do what they wanted. My next question: If that is the case, why does the federal government tell us what we can and cannot do with these accounts?
LORI GRAHAM
Los Angeles
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Re “Seniors Get a Hard Sell on Fee-Laden Annuities,” second in a three-part series, April 24
Annuities can be good, safe, conservative investments, and, like all investments, there are benefits and risks. All annuity contracts are not equal. They should be scrutinized at the time of purchase. Some contracts offer a better return than CDs. The equity-index type can be safer than the stock market in that most offer a low guaranteed return in case the market does not perform well. They could be annuitized for a certain number of years and then passed, probate free, to heirs after death. Most contracts waive surrender charges at the time of entering a nursing home or at death. Seniors, as well as other investors, have to investigate all the provisions of the contract before making a decision. They should definitely work with a reliable agent with good references who is associated with a good, solid insurance company.
FRIEDA DALLAL
Culver City
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Re “Unions’ Advice Is Failing Teachers,” last in a three-part series, April 25
The Times is right to decry the fact that Los Angeles Unified School District teachers are pushed into high-cost annuities instead of low-cost mutual funds. It is wrong, though, to blame the union. District teachers are universally barred from the kind of low-cost mutual funds The Times recommends. This has nothing to do with the union -- it is because the district, like many others, forces 403(b) vendors to sign a “hold harmless” agreement. Signing it exposes a company to potential liability, so low-cost vendors refuse. Because this completely blocks our access to low-cost mutual funds, our union’s endorsement of some of the mediocre annuities left to us is beside the point.
SCOTT BANKS
Claremont
