How Much Is Your 401(k) Costing You?

If you’re regularly making contributions to a 401(k) plan, you understand the importance of saving for your retirement. But did you know a variety of fees may be siphoning off some of your money?

While no account is “fee-free,” it’s important to understand how much you’re paying. Over time, fees can compound and impact your total savings. According to the U.S. Department of Labor’s Employee Benefits Security Administration, the difference in paying just 1 percent more in fees could reduce your savings at retirement by up to 28 percent over the course of a career.

Because some fees are deducted before you receive your account statement, it has been difficult to tell how much you’ve been paying. But new rules issued by the U.S. Department of Labor may help you become a more informed investor. Employers and service providers are required to disclose the fees associated with their plans, through annual and quarterly statements that clearly reflect all of the charges.

Here are some of the fees to monitor on your statements:

• Plan administration – These are fees associated with the day-to-day administration of your plan, and can include such things as accounting, recordkeeping and legal costs. The more services offered through your plan—such as seminars, software and electronic access to your account—the higher the fees might be. Administration fees may be broken out separately or combined with investment fees.
• Investment fees – These fees cover the management of your investment and are deducted directly from your savings, often as a percentage of the total account value. Investment fees vary widely depending on your investment, but can cover such things as product research, account monitoring, commissions, transactions and sales charges.
• Service fees – If you choose to take advantage of a special offering or feature within your account, you may be charged an individual service fee. Often, these fees are reported separately from the others.