Fear of Fees in Defined Contribution Plans

Pang, Gaobo. 2016. “Fear of Fees in Defined Contribution Plans.” Journal of Financial Planning 29 (7): 46–51.

10 Pages Posted: 2 Jul 2016 Last revised: 29 Jul 2016

Date Written: February 3, 2016

Abstract

Discussions are often anchored at fees when investment offerings, such as target date funds, are being vetted for defined contribution plans. A decomposition of wealth accumulation over the life cycle demonstrates the foremost role of persistent savings and, on this foundation, the power of long-term investing. Mandating a fee cut can make plan participants better off, other things being equal, but the gain is diminishing once the fee is compressed to a fairly low level. Selecting or dismissing investment strategies based on fees in isolation, absent a holistic view, is likely a biased effort in helping workers prepare for retirement.

Keywords: defined contribution (DC), target date funds (TDF), fees, fiduciary duty, plan sponsors, retirement, behavioral bias

Suggested Citation

Pang, Gaobo, Fear of Fees in Defined Contribution Plans (February 3, 2016). Pang, Gaobo. 2016. “Fear of Fees in Defined Contribution Plans.” Journal of Financial Planning 29 (7): 46–51., Available at SSRN: https://ssrn.com/abstract=2803337
No contact information is available for Gaobo Pang

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