Retirement Plan Fees

Investing
#1

Hi All,

What is a normal yearly fee an employee would pay for a 401K plan at work? Between Advisor fees + Newport port fees (that’s our portal) I am paying $100 approximately a year. It is unclear if there are investment fees included in this.

  1. What is an acceptable 401K yearly fee range and what all fees does it contain?
  2. If the fees I’m paying are too high, what should I do to offset the fees?
    Please help! Thanks!!
#2

Hi @Bansari_Mehta!

Thank you for your question! I think you are doing exactly the right thing since you are taking a close look and trying to understand all of the fees! $100 a year is about average for smaller company 401k plans. Since it is a flat dollar amount, it can represent a large percentage when you first begin contributing to the 401K plan since your account balance will be smaller. I would first find out:

  1. does your employer offer any form of a match?
  2. what are the expense ratios of the funds in the plan? Specifically, am curious about the Target Fund Fund. The expense ratio is in addition to the $100 annual fee.

If there is an employer match, it is still worth contributing to the 401K plan since an employer match is free money! If there is no match, then it may be worth considering an IRA/Roth IRA depending on your income level.

I hope this helps! Please let us know if there are any other questions!

#3

Thanks for the response.

  1. There is an employer match, yes.
  2. Expense ratio for target date where my funds are is :0.150% OR $1.50 (per $1000)
  3. Something else I found in the participant docu: Recordkeeping and Administration Fee 0.4100 % of plan assets and also Investment Management Asset Based Fee 0.5000 % of plan assets.

Does is still sound reasonable a plan and its expenses?

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#4

If there is an employer match, it is definitely worth contributing! I would double check the vesting period of the match. Sometimes, matches can take 1-5 years to fully vest.

For your third bullet above, those seem very high. Especially if that is in addition to the $100 annual fee. If you can, it might be worth double checking with someone in Benefits / HR to see what those are. There usually is not an additional Investment Management fee if you are investing in an “off the shelf” fund that the plan offers, like the Target Date Fund. Regardless, it is still worth it to contribute up to the employer match and then utilize an IRA or Roth IRA for any remaining retirement contributions that you would like to make.

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#5

Hi Shane, thanks so much for the response! Actually, I just found out that the fees are not $91 but referred to as basis points and is the 0.91% fee described in point #3 above. Sorry for the misinformation! I know I am to ask about fees but didn;t know the breakdown. Is this still an average fee or is it too big a fee? I appreciate you responding!

#6

Having to pay an annual 0.91% fee is on the high side. Since there is an employer match, I would consider contributing up to the match amount so you can take full advantage of that. And then use an IRA and/or brokerage account to continue saving and investing additional money if you can!

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#7

Thank you, Shane. Just what I was afraid of :frowning:

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