Account maintenance fee But as we’ve seen from the above bill, even 2% can make up a big part of your retirement savings. Fees of around 0.50% are reasonable for a 401 (k). Anything above 1% falls into an area that is more beneficial for the plan manager than for savers. The biggest factors in the cost of your 401 (k) are the size of your company and the plan it uses, David Blanchett, head of retirement planning for Morningstar’s Investment Management Group, tells CNBC
Make It. According to
his research, the average total fees range between 0.37% for the largest plans and 1.42% for the smallest plans. Even if you’ve managed to avoid a session about operational benefits, you’re undoubtedly familiar with the concept of a 401 (k) plan. However, when you’re discussing what to do with a 401 (k) when you leave a company, it’s important to understand the subscription fees. From the investment managers who transport your money to the back offices that handle compliance and accounting, everyone wants
a cut.
If you were working for a large company and the 401 (k) plan offers lots of investment options and cheap fees, it might make sense to keep it there, Blanchett says. The most entrenched fee is the 12b-1 fee, named after the relevant section of the Investment Company Act of 1940, and don’t forget to consider whether you’re more comfortable with an index fund or an actively managed fund. The fees can be found in your 401 (k) overview description or in the individual fund prospectuses
.
A survey by TD Ameritrade found that only 27% of investors knew how much they were paying in 401 (k) fees, and 37% didn’t know they were paying fees at all. In addition to management and investment fees, there may be individual service fees when you use the optional plan features. The fees aren’t actually hidden, but are shown in the prospectus that is given to new customers when they sign up for a plan. According to a recent analysis of fee data from those who used the 401 (k) Fee Analyzer tool, the average total cost of these fees amounts to 0.45% of total
invested assets.
When you join a 401 (k), you pay fees that can vary significantly from plan to plan and are not always obvious. The largest part of the fees you pay in a 401 (k) plan are the fees associated with the investments themselves.
