How 401(k) fees can cost tens of thousands in retirement savings
Summary
Many U.S. workers use 401(k) retirement plans but may not know about fees that can reduce their savings by tens of thousands over time. These fees vary by plan size and investment choices and include investment management, administrative costs, and optional service charges.Key Facts
- Over half of U.S. workers rely on 401(k) plans to save for retirement.
- A difference of 1% in fees can reduce retirement savings by about 28% over 35 years.
- For example, $25,000 invested with 1.5% fees could grow to $163,000 versus $227,000 with 0.5% fees.
- About 40% of workers do not realize they pay fees on their 401(k) accounts.
- Fees come in three types: investment fees, administrative fees, and individual service fees.
- Larger plans usually have lower fees (0.3% to 0.5%) while smaller plans often have higher fees (1% or more).
- Employers may pay some fees, but many are deducted from workers’ balances.
- Plan holders should regularly check their accounts, as fees can change and employers must inform workers of changes within 30-90 days.
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