Q: Is my 401(k) free, or do I pay fees? And if so, how much does it cost?
First off, you aren't alone. Most Americans couldn't tell you what their 401(k) fees are, or if they even have them. Thirty-seven percent believe their 401(k) has no fees at all, while another 36% either don't know their fees or don't know where to find them, according to a recent TD Ameritrade report.
The easy answer is that all 401(k) plans have fees. And there are two general categories: administrative (also known as "participation") fees and investment fees.
Ninety-five percent of 401(k) plans charge administrative fees, and these cover the costs of things like record keeping, legal services, customer support, and transaction processing.
In addition, all 401(k) plans charge investment fees (or at least I've never heard of one that doesn't). These are fees charged by the investment funds you choose, and are typically listed as "expense ratios" in your plan's literature.
These fees are expressed as a percentage of assets, and the average 401(k) costs 1% of assets every year for all fees. In other words, the average 401(k) participant will pay $1,000 for every $100,000 in plan assets.
However, this can vary tremendously. Generally speaking, large-scale 401(k) plans are cheaper, while small business 401(k) plans tend to have the highest fees. All fees are clearly disclosed in your plan's literature, or you can ask your plan administrator for information on your fees.