2

I have a good employer match of a straight 25%. Deposits are made weekly. My balance is roughly $150,000. I have contributed $17,800 YTD, and paid $817 in fees, or 4.6% of my contributions.

Are these fees reasonable, high, or low? Are 401(k) fees based on contribution amounts or total account balance?

  • 1
    I don't know your age, but unless you're in the catch-up range, you've passed the legal limit on your 401k – littleadv Oct 17 '12 at 2:54
  • Turned 50 this year. – Mark Oct 17 '12 at 3:13
  • 1
    @MrChrister Far be it from me to roll back an edit by a moderator. But please reflect that the nonlocal question that you have added about " compare fees against the market or competitors" is meaningless. An employee is restricted to participation only in the 401k plan offered by the employer, and so far as employees are concerned, there is no market, and no competition: if an employee does not like the 401k plan, the only options are to not participate at all or find employment somewhere else which offers a better 401k plan. – Dilip Sarwate Oct 28 '12 at 19:16
  • 1
    @MrChrister Yes, the market is for employers as buyers, not employees. Yes, employees can pressure employers to change 401k administrators and to adopt a plan with smaller fees etc., but the fine details of those contracts are not something that employees are privy to. 401k providers have different contracts for different employers, and the annual fees to be charged to participants are just one of many items that get negotiated between employer and 401k provider. The expected number of participants and the assets expected to be invested also influence rates. (continued) – Dilip Sarwate Oct 29 '12 at 2:51
  • 1
    @MrChrister (continued) Thus, the question about rates can well be construed as being off-topic for money.SE because it has little to do with personal finance, far more to do with business operations. – Dilip Sarwate Oct 29 '12 at 2:54
4

817/150,000 = .54%

Fees are based on balances not deposits, usually. Putting a front loaded fund as an option in a 401(k) should be criminal, not sure it is though.

Ask your HR dept to provide you fee details. If the .54% is correct, it's not bad.

I hope you have money from prior jobs as well, by the way.

  • Thanks Joe. I forgot to say that our plan began in the spring (switched from ING), so the fees are over 6 months. The average balance over the 6 months was about $140K. We have 2 other 401Ks, one I still keep with a previous employer, and my wife has a self-directed account after a layoff. I started a Roth IRA two years ago as well. I'd like to retire by age 65 or sooner which is why I I am trying to understand things such as these 401K fees. Thanks for your comment. – Mark Oct 17 '12 at 3:52
  • 2
    @Mark Unless there are specific investment opportunities available to you through your ex-employer's 401k plans that are not available to you elsewhere (and you want to invest in these), you may want to think about rolling over the 401k monies in ex-employer plans into your IRA. You are continuing to pay annual fees on those 401k plans, and, as a rule-of-thumb, 401k plan fees are higher than IRA fees, and 401k plans tend to offer high-expense mutual funds as investment vehicles in contrast to the many low-expense funds available to you for your IRA investments. – Dilip Sarwate Oct 17 '12 at 11:18
  • @DilipSarwate - you know there will always be some exception to all the things that are generally correct. If Mark has any post-tax (i.e. not deducted) IRA funds, he should consider a conversion to Roth now before the 401(k) to IRA transfer occurs. Else the IRA will now have a large pre-tax component and it will be more costly to do any Roth conversion. This may not apply to him, it's just the one reason I might hold off on that transfer. – JoeTaxpayer Oct 17 '12 at 17:54
  • @JoeTaxpayer I agree with your comment, but please note that I did say "...you may want to think about.." instead of "This thing you must do right away." There is one issue that you may want to point out, though. If I remember correctly, IRA assets can be taken by creditors in a debt collection proceeding (or bankruptcy proceeding?) but 401k assets cannot? Or is it the other way around, or it makes no difference either way based on current law? – Dilip Sarwate Oct 17 '12 at 18:33
  • Thank you both. I keep my old 401K because the majority is a privately held company stock that has done extremely well over the years. Once I sell, it is gone forever. I am diversifying by investing elsewhere. When my wife lost her job I sold enough of the company stock to pay off the house and cover the associated capital gains tax burden. Since we are debt free, I'm able to max my 401K and put $6K into a Roth Ira annually. – Mark Oct 17 '12 at 19:30

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.