401K Plan Fees
What are 401K Plan Fees? If you aren’t sure what those little charges are to your 401K plan, then here is a simple list of some of the basic 401K plan fees that can be charged against your 401K retirement account. Now, this is not an inclusive list of 401K plan fees, as there are more specific fees that can be charged depending upon your investment portfolio. If you have stocks, bonds or mutual funds in your 401K, there are certain to be other charges.
Plan Administration Fees - This is the everyday operation fee for basic administrative services, such as record keeping, accounting and other services. This fee is necessary to administer the plan as a whole. Also, other options and features of your individual 401K plan may be charged into this category as well. Other services may include telephone voice response systems, access to a customer service representative, educational seminars, retirement planning software, investment advice, electronic access to plan information, daily valuation and on-line transactions.
In certain cases, the costs of the administrative services charge will be covered by investment fees that are deducted directly from investment returns. If they are not, then they could be charged separately and will be paid by your employer or charged to the assets of the plan as a whole. When paid directly by the plan, administrative fees are either allocated among individual accounts in proportion to each account balance (i.e., participants with larger account balances pay more of the allocated expenses) or passed through as a flat fee against each participant’s account. Either way, generally the more services provided, the higher the fees.
Investment Fees - One of the largest 401(k) plan fees and expenses is the investment fee. It is associated with managing plan investments. Fees for investment management and other investment-related services generally are assessed as a percentage of assets invested. You should pay attention to these fees. You pay for them in the form of an indirect charge against your account because they are deducted directly from your investment returns. Your net total return is your return after these fees have been deducted. For this reason, these fees, which are not specifically identified on statements of investments, may not be immediately apparent.
Individual Service Fees - In addition to overall administrative expenses, there may be individual service fees associated with optional features offered under a 401(k) plan. Individual service fees are charged separately to the accounts of individuals who choose to take advantage of a particular plan feature. For example, individual service fees may be charged to a participant for taking a loan from the plan or for executing participant investment directions.
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If you are new to a 401k, looking into getting a 401k, or just curious about how it might fit into your retirement package, then you have come to the right place.
Thanks for the tips and advice about these fees!