Do you know how much you’re paying in 401(k) fees? Or that you’re being charged fees at all? According to a TD Ameritrade Survey, 27% of participants didn’t know how much they were paying. And, 37% of those surveyed didn’t know they were charged fees at all. This doesn’t quite square with the fact that 95% of 401(k) participants pay fees. Even fees that seem small can add up over time. This is important if a large chunk of your retirement savings is invested in a 401(k). Fortunately, there are ways to help find out what you’re paying, so you can be aware of 401(k) fees.
When figuring out a 401(k), know that your 401(k) provider is required to disclose all fees to you, as per a 2012 mandate of the U.S. Department of Labor. They will likely be stated in the prospectus you receive when you enroll in a plan. If you opened your 401(k) decades ago and don’t remember seeing this prospectus, you can check in the updates you most likely receive annually. Look for categories or line items like “Total Asset-Based Fees,” “Total Operating Expenses As a %” or “Expense Ratios,” which all measure fees.
So why do you pay fees? You may not realize it, but there are administrative and investment management costs for 401(k)s. Fees can spring from the plan provider and the individual funds within the plan. There isn’t much you can do about the plan provider fees, but you might have some choice when it comes to selecting funds within the plan with lower costs or expense ratios, depending on the 401(k) provider. The size of fees can vary: Some people may pay under 0.5% in fees, while others may pay more than 2%. This rate depends on the size of your employer’s 401(k) plan, the number of participants, and the plan provider. 
Even 2% might not seem like much, but over the course of your career, it can add up. A study by the Center for American Progress found that the typical worker who starts contributing to a 401(k) at age 25 and earns a median salary will pay about $138,336 in 401(k) fees over their lifetime. So if you have a higher income than the median, think about how much fees could be costing you when you’re trying to make the most of your 401(k).
If you’re unsure of how much you’re paying in fees, contact the professionals at APO Financial. We can help you calculate how much the fees are costing you and present you with potential alternative options. Even expense ratios that seem small can add up over time, possibly impacting the size of your nest egg. To schedule a time to talk with us, you can sign up for a no cost, no obligation financial review.