Do You Know How Risky Your 401k Is?

>> Hidden fees and 401K plans seem to be adding insult to injury given that so many Americans have seen their accounts decimated. Last night 60 Minutes spoke with Congressman, George Miller whose proposed new legislation to force disclosure of these hidden fees.

>> George: Now you've got a bunch of economic wizards jumping in and taking money out of your retirement plan and they don't want to tell you how much, you can decipher it in simple English and they're not interested in disclosing it or having any transparency about it.

>> Joining us now is Jill Slessenger assumed spelling, Editor at large for CBSMoneyWatch.com. Good morning Jill.

>> Jill: Good morning.

>> Alright tell us exactly what the congressman is so concerned about. Should we have these concerns, should we have other concerns?

>> Jill: Well I think what the congressman is voicing is the anger that it's hard to figure out where you pay fees in retirement accounts just like it's hard to find out in a regular brokerage account in a mutual fund, it's kind of weird and opaque, but I don't think that that's the big issue. To me that's an easy thing to latch on to. The bigger issue is that we created 401K plans back in the 80's, the early 80's and we never gave people the education that they needed to understand risk and risk is what it's all about. If you lost 40% last year it certainly dwarfs the extra half a percent in fees that you may not be able to find.

>> So how do we find out, you're right, 'cause like when I got into my 401K I never even thought of risk because that was a sure fire thing. How do we find out about these risks?

>> Jill: Well that's the problem we're not educating our participants and we should -- what the congress should be doing is making education a mandatory requirement for participation in the 401K plan. Here's what happened, the 401K was introduced and coincidently there was a massive 20 year bull market that ensued so we all got a little bit lazy and companies got lazy, participants got lazy, but these are risky assets in sight of this and, by the way, we made a transfer from pension plans to 401K's. Do you know what happened then, we transferred the risk from the company funding your retirement to you funding your retirement. What a massive transfer of risk just occurred under everybody's noses and we didn't give people the tools they needed. So we need to get back to that place where we say let's tell people what, you know, really the basics of investing and how important it is to manage the risk 'cause no one's doing it for you anymore.

>> Well shouldn't the company be responsible for telling you what the risk is involved 'cause it sounds like it used to be on them, it was their risk and now it's on us, so should we participate in these 401K's, what do we do?

>> Jill: Well the problem is that if it's the only plan available if you don't have a pension then you should be participating. The old financial planner in me would tell everybody to participate but what we'd like to see is people going through a more rigorous training. You know, if you're gonna have to sit through all the different training you go through at a company whether it's sexual harassment or just training on a computer why not make that a big component, let's get you through a 3 or 6 or a 9 part series on how to manage your money, how to better manage your risk. And frankly if we did that we would have a happier workplace, wouldn't we 'cause people wouldn't be freaking out right now thinking, oh my God half of my retirement account just evaporated.

>> Can people do this easily?

>> Jill: You know it is incredibly easy and really to educate yourself if you've got the gumption to do it, which, you know, I know is hard. If you go on to the website of the plan sponsor in most cases it's a big mutual fund company there are steps that you can take, but we would like to see is people go to their employers and say, give us education, help us with this, bring someone in from that fund company, from that plan sponsor, don't tell us what the best fund is tell us what we need to know about how to best manage our money.

>> Jill Slessenger, good advice.

>> Jill: Great to see you.

>> Thank you so much, great to see you.

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