As lifecycle funds—easy to use “set it and forget it” funds—continue to pick up traction in 401(k) plans, financial advisers are beginning to warn investors against the high fees many of these funds-of-funds tend to charge, Dow Jones reports.
Whereas the average equity fund in a 401(k) plan charges a 76-basis-point management fee, lifecycle funds charge between 1% and 2%.
Lifecycle funds have been growing rapidly in recent years and are expected to become the default option in 401(k) plans that automatically enroll workers, due to provisions in the Pension Protection Act passed last year. Since 2003, when assets in such funds were $25.6, they have more than quadrupled to $114.5 billion, according to Financial Research Corp. data.
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