Costs matter. Vanguard founder Jack Bogle has been saying that for years and I’ve been echoing him every chance I get. When it comes to 401(k) expenses, costs loom large, although few pay any attention to them. Most employees assume their employers are getting the best deals for them when, in most cases, they aren’t.
Enter the exchange-traded fund (ETF) platform. This is a new way of tapping ultra-low-cost ETFs for retirement plans. ETFs pool money like mutual funds, only they are listed on stock exchanges. Most of them are passive index funds that invest in large baskets of commodities, stocks and bonds.
Although the $2.4-trillion-plus ETF market has been growing like topsy for years, only recently have they been added to retirement plans. Companies like InvestnRetire, for example, have made it possible to own ETFs and reinvest in them through vehicles like 401(k)s. The bookkeeping technology has gradually caught up with the explosion in ETFs.