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My employer uses a relatively new company called "Human Interest" for our 401(k)s. I have 401(k) accounts with Fidelity and TransAmerica from former employers, and I'm trying to decide which is best.

The thing that caught my eye is that Human Interest charges me 0.5% of account balance + 0.07% average fund fees per year. That sounds outrageous to me, but as I started digging deeper into the fees at my other accounts, I could not get a straight answer.

So I'm writing to ask if SE thinks 0.5% a year is a lot?

EDIT1: as a side note, can someone please explain to me why a 401k administrator charges admin fees, while plenty of brokerages (Schwab, TDAm) don't charges admin fees for their non-retirement accounts?

  • For comparison, the "ADP TotalSource 401(k)" plan administered by Voya has 0.32% for Voya added onto the expense ratio of every fund (including the self-guided brokerage window)... and the core funds themselves average far more than 0.07% in expenses. (ADP is one of the biggest providers of HR outsourcing in the USA, I think it's actually the biggest but certainly one of the largest five). – Ben Voigt Sep 29 at 5:41
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    Note that as you discover the fees associated with your 401(k) accounts from prior employers, you will want to roll over those balances to fee-free IRAs instead of into the new 401(k). – Ben Voigt Sep 29 at 5:42
  • Are you asking whether or not to roll your old 401(k) plans into your new one? If so, then don't. @BenVoigt is right: roll them over into an IRA (probably at Fidelity, since you already have an account there). – RonJohn Sep 29 at 10:52
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    For my own curiosity how big is your employer, I suspect quite small. – quid Sep 29 at 16:00
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    Really, it is only the title that needs to be edited. The name appears naturally in the question body as part of the supporting information, and doesn't detract from the fact that the question is about the terms of the plan and not the provider. Only the title suggests that the provider itself is under review. – Ben Voigt Sep 30 at 16:28
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For comparison, my ex-employer (401(k) still there) charges a fee on their S&P fund of .016% . If the decimal and % sign seem confusing, it's $160 per year, per million dollars. No other fee. the .07% is reasonable, the .5% suggests depositing to get the full match, but no more than that.

To the edit, why do they charge an admin fee? I suspect it’s because they can. I’ve seen data showing the top (ranked by expense) 401(k)s have total expenses over 2% per year. This is more than I will have paid over my account’s total lifetime. The rule of 72 works in reverse. 2% over 36 years will steal 1/2 of your account value. Your expenses are not great, but I wouldn’t use the word ‘criminal’ as I would for the 2%.

  • Is the .016% a fund fee or an admin fee? – Charles Sep 29 at 17:42
  • Fund fee. The 401(k) has no additional admin fee, as it’s large enough that fund fees still add up. (And I believe the company is paying the admin as well) – JTP - Apologise to Monica Sep 29 at 17:48
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Can someone please explain to me why a 401k administrator charges admin fees, while plenty of brokerages (Schwab, TDAm) don't charges admin fees for their non-retirement accounts

Because there is paperwork involved, gobs and gobs of it, for a 401(k) account with multiple participants.

As you mentioned you'll find non-retirement brokerage accounts, IRA brokerage accounts, and even solo 401(k) accounts with no or trivially low fees. But as soon as ERISA gets involved (to make sure that the employer is treating the employee fairly), regulators get involved and the fees jump up.

You're also paying for the liability insurance that will pay out if you sue your plan administrator for lining their pockets (abnormally high recordkeeping fees, or steering all fund choices to a fund provider that gives the administrator a kickback), and for the lawyers that defend them against such lawsuits.

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Fidelity charges zero account fees. I would move the Transamerica account to Fidelity and use that as a warehouse for your money.

This new employer's 401K is less than ideal, but please don't let that preclude you from investing. Contribute, often, as much as you can, and early. While the fee will hinder you some, it will pale in comparison to just the tax advantage of such accounts.

When you move on from this employer, simply roll your account over into Fidelity.

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