GAO urges 401(k) fee disclosure
Participants in 401(k) plans may be losing thousands of dollars in retirement savings because of sponsor fees, a report said Thursday, in urging investors be given a clearer picture of the fees they pay.
Current retirement savings law, passed in 1974, does not explicitly require 401(k) plan sponsors to disclose comprehensive information on fees, the Government Accountability Office said. “Yet even small fees can significantly affect retirement savings over the course of a career.”
The GAO gave as an example a 45-year-old person who leaves $20,000 in a 401(k) account until retirement. If the average net return is 6.5 percent – a 7 percent investment return minus a 0.5 percent charge for fees – the account will grow to $70,500 at retirement.
But if the fee is 1.5 percent, the person will have only $58,400 when he retires.
The report said Congress should consider amending current law to require sponsors to disclose fee information in a way that allows investors to compare options. The Department of Labor, it said, should require plan sponsors to report a summary of all fees paid out of plan assets or by participants.
Sao Paulo, Brazil
Starbucks opens 2 shops in Brazil
Starbucks unveiled its first stores in the world’s top coffee-growing nation on Thursday, hoping the hip shops will be a hit among fickle coffee drinkers used to paying a pittance for super-strong espresso.
The Seattle-based company spent four years researching the market in Brazil, the planet’s No. 1 coffee producer and second-largest consumer after the United States, before opening two locations in an upscale mall in Sao Paulo.
More stores are planned as Starbucks hopes to repeat the success it had in Mexico – opening 105 shops in four years – but executives reclining on easy chairs in one of the new stores told reporters the Brazilian market may be tough to crack.
Columbia, S.C.
Payday loan oversight pressed
The payday loan industry took $4.2 billion out of consumer pockets in 2005 because states have not done enough to restrict high-interest loans and practices that trap people in financial quicksand, the Center for Responsible Lending said Thursday.
States need to do more to limit interest rates and fees from repeatedly refinancing when people don’t have the cash to repay small loans because consumers can end up paying annual interest rates of up to 400 percent on small loans, said Michael D. Calhoun, president of the group.
The group’s report estimates 90 percent of payday lender revenue comes from people who can’t pay off loans when they’re due and not from one-time users trying to meet a short-term financial emergency. The typical consumer borrows $325 but repays $793, the report said.
Jamie Fulmer, spokesman for Advance America Cash Advance Centers Inc., the Spartanburg-based payday lending industry leader, said the report appears to be an attempt to undermine consumers’ access to payday advances.