If You Saw This Charge on Your Credit Card, You'd Cancel It. Why Don't You Question It in Your 401(k)?

Imagine how you feel when you discover a recurring charge on your credit card statement for a service that you either forgot to cancel or didn't sign up for. Even a small recurring charge of $10 or so usually elicits enough motivation to call the credit card company to have it stopped.

Now imagine that you work at a small business and have been incurring this charge for 30 years because your boss signed you up for a service that you never wanted - and this charge has actually been increasing this whole time. That would probably make you even more angry, right?

Now imagine that the reason your boss hired this service provider was because this individual is a close friend or family member of your boss, and that your boss never investigated the fact that this individual never actually provided or hardly any financial advisory services over this time period. Oh, and by the way, the charge has escalated to $200 per month and you already pay your own advisor for helping you select from an overly restricted list of investments due to how the advisor you are paying and not using set up the account. You would be livid, right?

Now imagine that you are being disproportionately penalized because this charge is being assessed to your retirement account, where the charges are passed on in proportion the account balances - and you have the largest balance! It turns out that this arrangement has cost you over $50,000. You might even be willing to file a lawsuit at this point, wouldn't you?

But these charges don't ever show up on a credit card or bank statement. They are just silently deducted from participants' accounts without any mechanism to allow anyone to feel the same pain you would from a charge on your credit card statement or a direct bill. Granted, there is a fee disclosure document, but few people know how to interpret it or even that it exists, so not surprisingly, it hasn't helped raise any awareness at all.

Nothing will change unless people stop normalizing being at peace with an abusive system they don't understand and are willing to confront their employers on how their retirement plan service providers are compensated .

I've explained more here:

https://www.paulsippil.com/why-the-401k-system-never-became-a-market