More and more AT&T employees are investing in their futures through 401(k) plans. AT&T employees who participate in 401(k) plans assume responsibility for their retirement income by contributing part of their salary and, in many instances, by directing their own investments.
As a AT&T employee, if you are among those who direct your investments, you will need to consider the investment objectives, the risk and return characteristics, and the performance over time of each investment option offered by your plan. Fees and expenses are one of the factors that will affect your investment returns and will impact your retirement income. This article will outline some of the major factors that may impact the severity of fees relating to your AT&T 401(k) plan:
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Funds that are “actively managed” (i.e., funds with an investment adviser who continually researches, monitors, and actively trades the holdings of the fund to seek a higher return than the market) generally have higher fees. The higher fees are associated with the more active management provided and sales charges from the higher level of trading activity. As a AT&T employee, you may want to consider how while actively managed funds seek to provide higher returns than the market, neither active management nor higher fees necessarily guarantee higher returns.
Funds that are “passively managed” generally have lower management fees. Passively managed funds seek to obtain the investment results of an established market index, such as the Standard and Poor’s 500, by duplicating the holdings included in the index. Thus, passively managed funds require little research or trading activity. For AT&T employees, it is worthy to account for the information when deciding who will manage your funds, and if their rates are adequate for the services provided.
If the services and investment options under your plan as a AT&T employee are offered through a bundled program, then some or all of the costs of plan services may not be separately charged to the plan or to your employer. For example, these costs possibly may be subsidized by the asset-based fees charged on investments. Compare the services received in light of the total fees paid.
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Plans with more total assets may be able to lower fees by using special funds or classes of stock in funds, which generally are sold to larger group investors. “Retail” or “brand name” funds, which are also marketed to individual and small group investors, tend to be listed in the newspaper daily and typically charge higher fees. As a AT&T employee, you should inform your employer of your preference.
Optional features, such as participant loan programs and insurance benefits offered under variable annuity contracts, involve additional costs. Consider whether they have value to you as a AT&T employee. If not, let your employer know.
Retirement plans, such as 401(k) plans, are group plans. For those working in AT&T, your employer may not be able to accommodate each employee’s preferences for investment options or additional services.