Why High 401k Fees Matter To You

Why High 401k Fees Matter To You

High 401k fees can have a significant impact on plan participant balances over time. Even seemingly small differences in fees can add up to significant amounts over the years. The exact impact of high fees will depend on a variety of factors, including the size of the fees, the length of time the participant remains in the plan, and the investment returns earned by the plan.

Our benchmarking data shows that the average small plan typically has plan fees that range from 1.32% to 2.50% per year which could reduce expected retirement savings by as much as 60%. This reduction in savings could have a significant impact on a participant's ability to retire comfortably.

Overall, high 401k fees can have a substantial impact on plan participant balances and it is important for fiduciaries to monitor fees. Ask your plan for a copy of the most recent benchmarking report they’ve completed. Be sure it was prepared within the last couple of years (we recommend annually) and that it was performed by an independent firm that specializes in 401k analytics and benchmarking.

401k plan fees can be difficult to calculate because of the lack of transparency inherent in the myriad of products and complicated service models available in the market. Bottom line is it’s your money so the more you know about your plan fees the better you will understand the long term impact fees have on your account.