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401k fees: Always Read the Fine Print

Dylan Telerski / 22 Aug 2019 / 401k Resources

Maginfying glass on 401k fees

Are you saving in your job’s 401k plan?

Whether you’ve just started, or you’ve been investing for years–you’re taking important steps towards financial security in your golden years.

When it comes to your savings potential, making smart, informed investment decisions can have a real impact on how much your savings can grow. That’s why it’s important to learn about the investment options you have to choose from in your plan and understand all the costs involved with those investments. Nothing in life (or in your 401k plan) is free–all services have costs, including investment

Learn about the investment options you have to choose from in your plan and understand the costs involved with those investments–all services have costs even those related to investments through your retirement plan.

In recent years, there’s been a lot of media attention on 401k cost and the fees both business owners and their employees are paying for 401k investments and recordkeeping services – and for good reason.

Differences in fees as small as 0.1% per year can lower your account balance by thousands of dollars by the time you retire.

For example: Assume an employee with 35 years until retirement has a current 401k account balance of $25,000 and earns an average investment return of 7% per year until retirement. Without any additional contributions, here is how 401k fees could affect the account balance at retirement.

Total 401k Fees
Account balance

0.5%

$227,000

1.5%

$163,000

Department of Labor, A Look at 401k Plan Fees

Understanding 401k costs and fees

It is important to understand the types of fees that may be assessed in a 401k plan and who can pay those fees, so you can make smart choices when it comes to your retirement savings. In fact, the retirement plan rules require the employer offering the plan to keep an eye on plan costs to ensure they are reasonable based on the services received. The employer must pay some 401k fees, and some are deducted from employees’ 401k accounts. Here are the fees that typically occur in a 401k plan and how they can be paid.

Type of Fee
Example
Who Pays

Plan Administration Fees

Fees for day-to-day operation of the plan, including recordkeeping and trustee services

May be paid by employer or from plan’s assets (debited from employees’ accounts)

Investment Fees

Fees for investment management, marketing, and distribution of an investment product, including sales charges or commissions

Deducted directly from investment returns in employees’ accounts

Individual Service Fees

Fees for a transaction or service affecting one employee (e.g., loan, investment advice)

Typically charged to the affected employee’s account, but may be paid by the employer

Settlor Fees

Fees for services primarily benefiting the business (e.g., forming the plan, tax consulting)

Must be paid by employer

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San Francisco, CA 94104
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© 2019 Ubiquity Retirement + Savings
Privacy Policy
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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