What expenses do 401k funds charge? For example, do they charge front-end or back-end loads (commission when buying or selling funds)? Also how do I find out if the 401k administrator charges a fee?
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Note that the 401k doesn't charge fees, the funds that may be in a 401k usually will. If you had a single stock in a 401k it wouldn't charge any fees, in fact would provide dividends (maybe). It would just be a BAD idea.– C. RossCommented Aug 13, 2010 at 12:23
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Here's another way 401k funds make money: geekculture.com/joyoftech/joyarchives/1434.html– Alex BCommented Aug 29, 2010 at 13:40
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2 Answers
At least for the 401K accounts I've seen, you have a number of fees on top of the loads/fees charged by the individual funds in your account.
The most common are:
1) Rebalancing fees (if you opt to rebalance your account periodically)
2) Hidden fees in fund prices. If you look up the fund symbols on any investing site you will see that the daily quoted prices are higher than the prices quoted in your 401K statements. That is because you usually don't actually own those funds, even if the symbols are the same. You own a fund run by the 401K company that APPROXIMATES the fund for the symbol listed. By approximate I mean that they add a ridiculous admin fee (can be in the 3%+ range) and value your holding at the market price minus that percentage. it is a clever way for them to make it look like they are providing their high priced services gratis. Such lack of transparency should be outlawed if you ask me.
Consult your funds' prospectus. Most 401(k) mutual funds I've seen are Class C shares and continually charge you a certain expense ratio (e.g. a rate of 1.5%/yr) and an early-redemption fee for shares held less than 90 days.
See also: http://en.wikipedia.org/wiki/Mutual_fund_fees_and_expenses#United_States