3 Kinds of 401(k) Fees and How to Reduce Them
Having access to a 401(k) plan is terrific for retirement savers, but you should be aware that these plans come at a price. There may not be an upfront cost, but 401(k) plans always have fees tucked away somewhere – often at several levels. Understanding how these fees work can help you to make wise retirement planning decisions.
The fees and expenses you'll find in your 401(k) account may sound small, but they can have an enormous impact on your returns. For example, let's say that you get a 401(k) account from a new employer and roll over $50,000 into the account. If you get an average 7% return on that $50,000 over the next 30 years, that money will turn into more than $380,000. However, let's say that your $50,000 is subject to fees adding up to 1.5% per year. In that case, instead of a 7% return, you'd actually be getting a net 5.5% return. And at the end of 30 years, you'd have less than $250,000 instead of $380,000. That's a pretty huge difference! You can see how keeping your fees low can dramatically increase the amount you'll be able to save in your 401(k).
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Source: Fool.com
