Do you know exactly how much you are paying in fees for your 401(k)? According to a recent Forbes.com article, 27% of Americans who participate in a 401(k) think they know how much they are paying in fees and 37% mistakenly think they are paying no fees!
The reality is all 401(k) plans have fees. There are three major categories of fees on typical 401(k)plans—investment fees, participant fees and administration fees. How do you find this information and what can you do about the fees? By law, the administrator of your 401(k) is required to send you quarterly statements with fees and expenses clearly disclosed. These documents may be sent electronically and easily overlooked, however with some digging, you can find them.
If you have money in a 401(k), you are paying investment fees. These fees cover the management of the investments in your plan and are usually the largest portion of the overall fees you pay. For example, if you choose a mutual fund with a 1 % expense ratio, you would be paying annual fees of approximately $180 if your account balance was $18,000. We are not advocating picking funds based exclusively on fees, but you should be aware of the costs of each investment option.
Administrative and Participation Fees
It is estimated that 95% of plan participants pay participant fees. Sometimes these are listed as “administrative” fees. These fees cover the plan’s costs such as record keeping, accounting and legal fees. In some cases, these fees can be tied to how much you have invested in the plan, or can be a flat fee.
Expenses are just one factor of the operation of your retirement plan. Fees will vary from plan to plan, but this is something that you should look at each year. If you have concerns regarding the fees you are being assessed, speak to your plan administrator.
Learn more about how Budros, Ruhlin & Roe’s Retirement Plan Services team could help your employer manage the fees that are assessed for your 401(k).