The high cost of 401K Plan administrative fees!

Surprisingly, minor administrative fees in 401K plan can make a substantial difference. A Government Accountability Office study compared the difference between paying 1.5% annually in fees versus 0.5%. It started with an individual’s 401K balance of $20,000 and assumed it grew by 7% each year. Paying 0.5% in fees would leave the person with $70,500 in 20 years. But, instead of shelling out 1.5% in fees slashed the balance to $58,400 during the same period. That’s a 17% haircut to your retirement nest egg. 
However, the real concern is that most people are not even aware there are administrative fees for a 401K plan. A recent LIMRA study shows that 90% of 401K plan participants either didn’t think they paid any fees, or didn’t know the fees they paid for their plans. The truth is everyone pays a fee to have a 401K… and workers — not employers — pay for most of the plan fees. The average 401K plan administrative fee is about 0.78% per year. Which means you pay $780 annually for every $100,000 you have in your 401K.

Then There Are The Annual Investment and Management Fees!

In addition to the 401K plan administrative fees there are the annual investment and management fees of 2-4% on each of the accounts that are inside of the 401K. As a result, these additional fees would significantly reduce your retirement funds even further.
By the way, that same $20,000 earning 7% per year… without any annual fees… would be worth $80,775.
Yes, there are much better options than a 401k plan; where you don’t pay any annual fees; all of your money immediately goes to work for you; and you can still get a tax write off!
- Doug Myrick