Tom Brady isn't the only one that should fear deflation—the economy should too

Tom Brady isn't the only one that should fear deflation—the economy should too

Alex Rosenberg | @CNBCAlex

CNBC.com

      

The specter of deflation is haunting more than New England Patriots quarterback Tom Brady. The whole U.S. economy is now grappling with its effects.


As growth splutters, the world's largest economy is facing the real possibility of a spiral in prices. On Thursday, the Producer Price Index for Final Demand showed that prices fell by 0.4 percent in April compared to March, and by 1.3 percent versus last April. The readings according to the previous-used PPI data series, known as PPI for finished goods, looked even worse, with a monster 4.4 percent year-over-year drop.




Steep price drops can be perilous for the growth of an economy that's comprised of nearly 2/3 consumer spending. While falling prices may sounds attractive from a consumer standpoint, they are bad for the overall economy since deflation encourages people to save, rather than spend, money. After all, why spend a dollar today when it will be worth the equivalent of $1.05 tomorrow?
However—and perhaps unlike the Patriots' embattled quarterback—the U.S. has a good excuse for the potential deflationary shock: Oil.

Crude's slide over the past year has reduced macro price metrics tremendously. And indeed, when energy and food prices are stripped out to produce what's known as the "core inflation" measure, PPI for Finished Goods actually rose by 2 percent over the course of the year. On the other hand, the core PPI for Final Demand number still fell 0.2 percent from March to April.
Simultaneously, some maintain that no matter how noisy the inflation reading may be, there are still bad signs embedded in it.


"The PPI came in well below expectations and trying to pin the drop in wholesale prices on any one component would be a mistake," wrote Steven Ricchiuto, Mizuho's unconventional chief economist. "The loss of upside momentum in prices is broad-based."

Headaches for the Fed?

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For Ricchiuto, the number also points to a headache for the Federal Reserve in its quest to raise short-term rates. The central bank has set an inflation target of 2 percent, and no matter what the actual inflation number is, 2 percent does appear to be elusive at this point.
This despite years of ultra-loose monetary policy, which theoretically should spur inflation by making it more attractive to spend rather than save money. If inflation does not pick up, the Fed may not see fit to raise rates.


"The PPI fits with my later-rather-than-sooner Fed call, and further supports my call for a sustained trading range on 10-year notes," Ricchiuto wrote.
That is, a delay in the Fed's rate-hiking plans would mean that Treasury bonds can stay put, instead of trading much lower as yields rise.
The key event for inflation-watchers will come on Friday, when April Consumer Price Index data is released. Economists are looking for inflation of just 0.1 percent, and 0.2 percent ex- food and energy.


But those more bullish than Ricchiuto, such as RBC senior economic Jacob Oubina, say that the April inflation reading should mark the "bottom" for inflation, with core inflation "grinding up" to 2 percent by year-end.


Oubina says that shelter makes up 42 percent of CPI, and since rental real estate "will continue to be in high demand, that alone will support the inflation backdrop as we make our way through the balance of 2015."


PPI is often used to forecast CPI, given that those produced goods will, in theory, be sold to consumers in the future. Yet the weak April reading doesn't spook the RBC economist, largely because it is such a "frustratingly volatile" economic reading.
"Energy and trade services alone pulled this index down. So the pass-through argument just doesn't pass the smell test," he said.

—By CNBC's Alex Rosenberg.

4 ways to outlive your retirement savings

Anna Robaton

Friday, 1 May 2015 | 10:00 AM ET

CNBC.com

Ever wake up in cold sweat at night wondering whether you'll outlive your retirement savings? You're not alone.

Many Americans have spent too much and saved too little, and traditional defined-benefit pensions have gone the way of the fax machine, displaced by 401(k) plans with modest balances.
The median 401(k) plan balance for two-person households nearing retirement (age 55 to 64) is about $111,000, according to the Center for Retirement Research at Boston College. To some, that may seem like a big nest egg, but it equates to less than $400 per month during retirement, assuming a yearly withdrawal rate of 4 percent, adjusted for inflation.

Don Klumpp | Photographer's Choice | Getty Images

To make matters worse, half of today's private-sector workers don't have any employer-sponsored retirement plan at their current jobs, according to the book "Falling Short: The Coming Retirement Crisis and What to Do About It," by Charles D. Ellis, Alicia H. Munnell and Andrew D. Eschtruth. Many of us will need more income during retirement than did previous generations, due to longer life expectancies and rising health-care costs.

"The fundamental problem," when it comes to retirement, "is that most people don't have much in the way of savings," said Anthony Webb, a senior research economist at the Center for Retirement Research at Boston College. "The solution to not having enough is to have a boatload of money. The question is: How do you acquire a boatload of money?"

If you are off-track when it comes to retirement savings, the obvious solution is to begin stashing away a huge percentage of your income, Webb said. But many people in their 40s and 50s are unwilling or unable to make that kind of sacrifice, he added. So then what?
Here are some ideas to consider:

1. Delay retirement. Retirement-planning experts say it behooves us to resist the temptation to call it quits in our early 60s, provided we don't have very physically taxing jobs. Putting off retirement has several potential benefits. It means more time to save and invest and, for better or worse, a shorter life expectancy during retirement.

"If you can work longer, for many people that will be a more palatable solution than saving a crazy percentage of your salary," Webb said.
Working longer also allows you to wait to claim Social Security retirement benefits.
Typically, the longer you wait to claim benefits, the bigger your monthly payments will be, up until age 70. Those who claim benefits at age 70 get a whopping 76 percent more per month than they would if they began drawing benefits at age 62, according to the book "Falling Short: The Coming Retirement Crisis and What to Do About It."

Many people draw Social Security benefits early, figuring they might not live long enough to make a higher monthly payout worth the wait. But that calculus can be problematic, because nobody knows exactly when they'll die, said David Mendels, a certified financial planner and director of planning at Creative Financial Concepts.
"You might die before your life expectancy, and if you do and you claimed early, you made the right call—and congratulations," he quipped. "But if you live longer than your life expectancy, you might end up eating cat food in your old age."

2. Redefine retirement. "Retirement used to be a reward for 40 years of drudgery," said Frank Boucher, a CFP and owner of Boucher Financial Planning Services. "Folks would die shortly after they retired, but that's usually not the case anymore."
Many of us will spend a couple decades in retirement, which gives us ample opportunity to engage in interesting and/or rewarding activities. For many people, that might entail some sort of post-retirement work, Boucher said. Part-time work allows retirees to put off tapping their nest eggs or draw down savings more slowly. Those who are self-employed are also eligible for related tax deductions.
Boucher is living by his own advice. Tired of traveling for work and wanting a change, he retired in 2006 from a national association providing financial education and planning services and started his own practice.
"You can really enhance your retirement finances by focusing on the things you are passionate about and getting paid to do them," he said. "A lot of people actually enjoy the work they do, but not the environment they do it in."

3. Look into buying an immediate annuity to hedge the risk you'll outlive your assets. Immediate annuities, sometimes called income or payout annuities, are pretty straightforward. Basically, you hand over a lump sum to an insurer in return for guaranteed regular payments for a period of time, say 10 or 20 years, or until you die. The payments may be fixed or increase with the cost of living, which helps counter inflation risk.

"Remember that you aren't investing for just the next five years. You are also investing for 20 years from now." -David Mendels, director of planning at Creative Financial Concepts

Sellers of these annuities are essentially redistributing income from contract owners that die relatively young to those who live a long life, said Webb at the Center for Retirement Research. So why part with a chunk of money when you run the risk of falling into the first camp? The rationale, Webb said, is similar to the reason people buy homeowner's insurance: Your house may not burn down, but if it does, you'll be glad you had insurance.

4. Don't ignore inflation and interest-rate risks. One of the biggest dilemmas many older Americans face is how to invest their savings. Mendels at Creative Financial Concepts says it's important to keep in mind that all investments carry risk and that it's okay to take some stock-market risk to help counter the real possibility that inflation will erode your spending power during retirement. Many retirees, he said, wrongly focus exclusively on income-generating investments, which can be volatile, too.
"Retirees jump through these hoops in an effort to generate more income and get into riskier and narrower stuff when they should be focused on total return as opposed to yield," Mendels said.
It is important, he added, to have a long-term perspective and "remember that you aren't investing for just the next five years. You are also investing for 20 years from now."

—By Anna Robaton, special to CNBC.com

Anna RobatonSpecial to CNBC.com

Insurance you'll still need in retirement

Once you're retired, you typically don't need disability or life insurance to replace your wages. You'll be living off other sources of income: your savings, any pensions, Social Security (with some exceptions -- more on that in a moment).

However, you really need to keep some policies in place even after you quit working. These include:
Liability insurance. You don't want to get to retirement only to be wiped out by an unexpected lawsuit. Liability coverage pays the costs if you cause an accident, your dog bites someone or you're otherwise found at fault for injury. Financial planners typically recommend having liability coverage at least equal to your net worth and preferably twice your net worth.
Trial attorneys will typically settle for the amount of your coverage if you're adequately insured. If you're not, they'll be motivated to go after your other assets. Your retirement savings are safe from creditors' claims, but other assets -- including some or all of your home equity, depending on state law -- are up for grabs.

Liability is part of your auto and homeowners' insurance, but the limits on your coverage may be too low. If so, consider adding an umbrella or personal liability policy that kicks in once your other coverage is exhausted. The first $1 million of coverage typically costs around $300 a year, with the next million costing about $75 and a third million $50, according to the Insurance Information Institute.

Health insurance. Medicare provides health insurance for the vast majority of people 65 and over, but the federal government program covers only about 60 percent of retirees' health care costs, according to the Employee Benefit Research Institute. Health care spending eats up 15 percent of the typical Medicare recipient's household spending, and EBRI calculates that a 65-year-old couple with median drug expenses would need $234,000 in savings just to have a 50 percent chance of having enough to cover health care costs in retirement.
If you don't have employer or retiree health insurance to supplement Medicare, you might want to consider buying one of 10 available Medigap plans offered by private insurers.
If you're under 65 and don't have health insurance from another source, you can buy an individual policy. If you can qualify for a government subsidy (and most people can), you should shop through an Obamacare exchange -- your state's version, if it provides one, or the federal exchange. Under Obamacare, everyone can get coverage -- you can't be denied or charged more because of preexisting conditions.
Disaster insurance. Even if you haven't quite got your mortgage paid off, chances are you have substantial equity in your home. Your home's value likely is a major part of your wealth and may be a resource you can tap in the future to fund your retirement.
But your homeowners' insurance may not offer enough protection. It doesn't cover floods, for example, or earthquakes in areas at high risk for those disasters. While homeowners' policies typically cover wind damage, you may need separate coverage to protect against hurricanes.
Disaster polices often come with high deductibles, so make sure you have enough cash set aside in an emergency fund to cover those.

Some other coverage you might want to consider:

Long-term care insurance. Medicare doesn't cover most nursing home or other "custodial care" expenses if you're not able to take care of yourself. The cost of long-term care can be astronomical, but so can the cost of insurance to pay for it. The best time to buy this coverage, if you can afford it, is in your mid-50s, according to the American Association of Long-Term Care Insurance and many financial planners.

If you're interested, look for an independent insurance professional who specializes in helping people compare policies. Also consider consulting a fee-only financial planner to make sure it's the right fit.
Life insurance. You need coverage if you still have people financially dependent on you, such as minor, special-needs children or a spouse who wouldn't be able to pay the bills if you died. You also may want a policy if your estate is so large that it would owe estate taxes (currently, estates worth more than $5.43 million). If that's the case, talk to an estate-planning attorney who can help you minimize taxes and find appropriate coverage.

Liz Weston

Liz Weston is an award-winning personal finance columnist and the author of several books, including the best-selling "Your Credit Score." Liz has appeared on "The Dr. Phil Show," "NBC Nightly News," "The Today Show" and CNBC, among other programs. She's on Twitter and Facebook and blogs at AskLizWeston.com

Why even high earners are struggling to save

Kelley Holland | @KKelleyHolland

Thursday, 16 Apr 2015 | 9:16 AM ET

CNBC.com

Even wealthier Americans are struggling to save enough for retirement, according to a new survey.
The report, released Thursday by SunTrust, found that even among households with incomes of $75,000 or more, roughly a third live paycheck to paycheck at least some of the time, and one-fourth of those with incomes of $100,000 or more do the same. 

According to Census Bureau data, less than a third of households across the country earn $75,000 or more a year, though median incomes are higher in some areas than others.
A third of respondents said a lack of financial discipline at least sometimes holds them back from achieving their goals. But older respondents were significantly more likely than the younger cohort to say they were not saving enough for retirement, or were not sure if they were. To some extent, that may reflect lifestyle habits more than financial struggles. Respondents cited spending on things like entertainment, clothing and dining out as affecting their ability to save.

Pamela Sandy, CEO and founder of Confiance, a financial advisory firm, points to other causes as well. Her clients are contending with such things as student loans, the cost of child care and the need to help family members. "Do I think people are just out there being frivolous? It is damn expensive to live in the country today, and it's damn expensive to raise kids, and that's just the bottom line," she said.

There is also the matter of financial smarts. A survey released Thursday by Guardian Life Insurance found that 401(k) plan participants have a low understanding of financial concepts and practices, which the company said "likely contributes to lower plan engagement and less successful retirement outcomes."

The Guardian survey also found that saving for retirement is low even among those nearing that life stage, with the average 401(k) plan participant over age 50 contributing $9,100 per year. (Tweet This) And only half of all the survey respondents are confident they will reach the level of retirement income they are targeting.

Sandy said low savings rates are to be expected. "We don't really have a problem with savings vehicles," she said. "We have a problem that people don't have the money to save."

Kelley HollandSpecial to CNBC

Public pensions at risk worldwide: Report

John W. Schoen | @johnwschoen 

 

Steve Cole Images | Getty Images

 

The world's retirement bill is coming due—and many countries aren't ready to pay it.
That's the conclusion of a report Monday from the Organization for Economic Cooperation and Development, a Paris-based group representing the world's developed countries.
With populations aging and lifespans rising, government-supported pensions are cutting deeper into national budgets, crowding out spending on other programs and services. The added burden comes as the economies of the developed world are growing slowly, putting added pressure on the tax revenues needed to pay rising pension costs.

The solution, according to the OECD report, includes boosting retirement ages, cutting back on early retirement and providing greater incentives for workers to save for their own retirement, including automatic enrollment in private plans.
"The ongoing rapid demographic shift and the slowdown in the global economy highlight the need for continuing reforms," OECD Secretary-General Angel Gurría said. "We must communicate better the message that working longer and contributing more is the only way to get a decent income in retirement."

In the U.S., much of the debate over pension reform has centered on the national Social Security trust fund, which has enough reserves set aside to fully cover its costs until 2027. Congress has debated a series of reforms that would extend the plans solvency, including raising contributions, indexing cost of living increases and taxing benefits.

State and local pensions are in much worse financial shape. A report in September by bond credit rater Moody's Investors Services found that, despite recent gains on their investments, U.S. public pension funds don't have nearly enough money to pay what they owe current and future retirees.

In less than a decade, that shortfall has tripled to at least $2 trillion—more than half of all outstanding state and local bond debt, according to the report.



Like nearly all retirement savers, state and local pension funds got clobbered by the 2008 financial collapse. But the pension shortfall had been building well before the downturn—and has been made worse by state and local government's shortchanging annual fund contributions. New Jersey, for example, took "contribution holidays" during the Great Recession and more recently has cut payments or just skipped them altogether, Moody's said.

Without reforms, the higher cost of an aging population threatens to stifle long-term economic growth as countries are forced to borrow money to cover their public pension promises. In Japan, where an aging population is experiencing the biggest gains in longevity, public debt is now more than twice the country's gross domestic product. Despite multiple government efforts to revive growth, Japan recently slipped back into recession after two decades of economic stagnation.



To better manage the financial risk posed by again populations, OECD officials want government to better communicate that risk to investors by creating a standard, global index. The benchmark would help investors price in the added financial burden of increases in longevity that are often buried in outdated longevity tables and other actuarial statistics.

The group also proposed that governments issue "longevity bonds" to hedge the risk that public pensions come up short in covering the cost of paying out the benefits they've promised retirees.
"Capital markets could offer additional capacity for mitigating longevity risk, but the transparency, standardization and liquidity of instruments to hedge this risk need to be facilitated," the OECD said in a statement.

John W. SchoenCNBC.com Economics Reporter

IRS changes the 401(k) rules for 2015

Hailey Lee | @haileylee139

Thursday, 23 Oct 2014 | 2:40 PM ETCNBC.com

COMMENTSJoin the Discussion

Taxpayers are about to get a bit more elbow room for retirement savings. Many contribution limits for employees with tax-favored retirement savings accounts were expanded for 2015, the Internal Revenue Service said Thursday.

The maximum for contributions in the government's Thrift Savings Plan, private sector 401(k)s and other comparable programs have been raised to $18,000, up from $17,500 in 2014 and 2013. For people over 50 years old, the "catch-up contribution" threshold has been increased from $5,500 to $6,000.

"You look at the $18,000 and wonder, gee, how many people can practically get to that level?" said Joe Ready, director of Wells Fargo Institutional Retirement and Trust. But as people "progress in their careers and earnings progressively go up," it will be increasingly important for elderly investors to max out the $24,000 limit, he said.

That's the combined total investment limit for people 50 and older—$18,000 for the 401(k) plus $6,000 for catch up.

Kenishirotie | Getty Images

"For those over 50 years of age—a group that needs to be far more aggressive about saving—the fact that they can get $24,000 a year in contribution is a strong message for them to save at a significant rate," said Kevin Crain, Bank of America Merrill Lynch's managing director with more than 30 years of experience in the retirement industry.

"If you look back to 2009, limits on 401(k) were around $16,000. These aren't huge bumps but it's slowly incrementing upwards and it's a nice message on the opportunity and power to save," Crain said.

If a worker is investing in both an after-tax Roth TSP (where withdrawals are tax-free), as well as a pretax TSP, then the $18,000 contribution limit applies to the amalgamation of both accounts.
For small business owners and self-employed workers that invest in an SEP-IRA or a single 401(k), the 2015 annual contribution limit rises to $53,000, a jump from $52,000 in 2014.
People who max out their contributions remain a minority but that group is growing, Crain said. In general, about 15 to 20 percent of active contributors max out their contribution limit, he said.

Some programs are unchanged. For Individual Retirement Accounts, the $5,500 limit will stay the same for 2015. Annual benefits from a defined benefit plan will stay at $210,000.
The adjustments were triggered by an increase in cost-of-living expenses. The secretary of the Treasury is required to adjust limits annually to reflect cost-of-living increases.

Read MoreSocial Security benefits will increase by 1.7%

Here is the IRS's full list of pension plan adjustments for 2015.

Finding, and Battling, the Hidden Costs of 401(k) Plans

John F. Wasik

Friday, 7 Nov 2014 | 10:35 AM ETThe New York Times

Like millions of retirees who assumed their companies had taken care of them, Ronald Tussey never thought that his retirement plan might be flawed. He trusted his company so much he kept his money in his 401(k) long after he left.

Having worked as an engineer for 37 years, ultimately at ABB Inc., where he retired 11 years ago, Mr. Tussey said he never paid much attention to the fees in his retirement plan and "assumed the company was looking out for my best interests."

But after seeing a television program on the negative impact that 401(k) expenses can have on retirement savings, he hired a lawyer, who filed a class-action lawsuit in 2006 against ABB and plan administrators.

August Kryger | The New York Times

 

Ronald Tussey, whose lawsuit against a former employer became a landmark case highlighting expenses in 401(k) plans, at his home in Lake Ozark, Mo., Nov. 6, 2014.

Mr. Tussey's suit became a landmark case that highlighted the sometimes excessive expenses in 401(k) plans. The suit remains largely unresolved today, while Mr. Tussey has become an archetype of an inexperienced litigant caught up in a legal battle far more complex than he ever expected.
"I had no idea about litigation," Mr. Tussey says. "It was unbelievable."


Like many employees, Mr. Tussey, now 70, was told that his retirement plan was "free," even though middlemen were deducting expenses from his savings.
In many retirement plans, a significant amount of future retirees' funds are devoured by fees. According to a 2012 study published by the progressive think tank Demos, high 401(k) fees can drain $155,000 from an average household over a lifetime. Higher-earning households can lose even more — up to $278,000.

Growing employee resistance, resulting from a greater awareness of plan costs, has resulted in more than 30 lawsuits against 401(k) plans and employers since 2006. Seventeen have been dismissed, but these suits are time-consuming, complex and difficult to litigate. The oldest 401(k) suits, like Mr. Tussey's, have been winding through courtrooms for the last half decade.

Despite a federal requirement that plan fees be disclosed and numerous reports on 401(k) plan flaws, few employees question how much they are being charged, much less take their employers to court. As Mr. Tussey learned, time spent on legal proceedings is clearly not on a par with time spent traveling the world, working in the community or taking up a new hobby.

After more than six years of litigation, a federal court in Missouri ruled in March 2012 that ABB and its record keeper, Fidelity Investments, violated fiduciary duties to the plan and participants and were liable for $37 million.

ABB appealed part of the case, but the United States Court of Appeals for the Eighth Circuit in St. Louis this year upheld the Federal District Court judgment that $13.4 million be awarded to participants.

A $1.7 million district court judgment against Fidelity was reversed by the higher court.
Nothing, to date, has been paid to ABB 401(k) plan participants. Lawyers representing the employees want the Supreme Court to review the case.
In the meantime, though, there are lessons here for current and future retirees.

David Franklin | E+ | Getty Images

 

At the heart of the suits are a raft of obscure fees and services that few employees will be able to discern. Unless employers absorb all of the expenses, you must pay the bills for plan record-keeping, administration and fund management.
Most fund expenses not covered by employers are deducted from plan assets — the money pooled for your retirement — and show up in an "expense ratio," which is expressed as an annual percentage of what you have invested. If your plan charges 1 percent on $100,000 invested, you are paying $1,000 annually in fees.



How much is too much for 401(k) expenses? It depends on the size and complexity of the plan. The Department of Labor's fee disclosure requirement, which went into effect about two years ago, will tell you how much is being deducted from your savings, but it won't tell you if that amount is too much.

In the somewhat opaque world of 401(k) expenses, a large plan may be the best deal, but smaller plans can still offer lower expenses if employers shop around. Often only an audit by an independent fiduciary who knows how to compare similar plans can determine whether you are being overcharged.

Jerome J. Schlichter, a St. Louis lawyer who represented Mr. Tussey and plaintiffs in other 401(k) suits, said there were some common elements in plans that could indicate lofty expenses and conflicts.

Even though no extra service may be provided, record keepers may reap higher compensation just because total assets increase from year to year. This number can be hard to find and even tougher to examine. Is your plan's record-keeping fee fair? You may need an independent consultant — someone with no financial interest in the plan, funds or middlemen — to properly vet this number.
Also look at revenue sharing. This is an often complex arrangement where a fund manager "shares" some of the fees it receives from fund expenses with other service providers, such as brokers. This practice, though declining, is particularly insidious since it provides little or no value to employees. It is derisively referred to as a "kickback" by 401(k) critics.

Expenses, perhaps the largest target for 401(k) suits, can be the easiest to vet because fees can be compared across plans and funds. Does your plan charge a "retail" fund fee? It shouldn't because 401(k)'s, even small ones, have access to the lowest-cost "institutional" or exchange-traded funds, which charge as little as 0.04 percent annually.

If your fund company offers multiple "share" classes, you will also need to know if you are getting the least expensive class. To get a basic idea, compare your plan with similar 401(k)'s on Brightscope.com. You can also look up individual fund expenses on Morningstar.com.
You will also need to see what kinds of funds are in your plan. Is your employer, particularly if it's a financial services company, offering "in-house" or "proprietary" mutual funds? They may be more expensive than other funds and pose clear conflicts of interest.
And keep an eye out for unnecessary fees that may be eating up your nest egg. These include commissions, also known as "loads," 12b-1 marketing fees, insurance-related charges, "wrap" fees and transaction expenses.

Even if you are acutely attentive to financial details or can fathom the arcane language of annual plan statements like 5500 forms, this is tough. Except for fund management fees, it's not easy to spot a blatant overcharge. Mr. Schlichter has found that even in a new era of plan disclosure, most employees "are not aware of these fees and don't learn much from their plan statements."

For help, you might want to consult outside resources, like the website Personal Capital. The online money manager has a free 401(k) Fee Analyzer. It will tell you how expenses are affecting your nest egg.

The Department of Labor's website has a wealth of information on 401(k) fees and disclosure, and you can also find a breakdown of 401(k) expenses at Bankrate.com.


What if you've found that your plan is a rotten deal, but you don't want to move your money and can't get your employer to change the plan?
As Mr. Tussey knows, it may be a long, rocky road through the court system, at the end of which you may not reap a penny.

Lawyers representing employees must prove not only that plan participants were charged exorbitant fees or employers showed a clear conflict of interest, but also that employers broke federal law by breaching their fiduciary duty. That's a legal standard that says employers must do everything in their power to act prudently on behalf of workers. In the case of 401(k) plans, that means finding a reasonable selection of low-cost funds and services.
But the legal landscape may change substantially. In October, the Supreme Court agreed to hear a 401(k) fee case. If the court rules in favor of employees, the floodgates could open for more retirement plan lawsuits.