Fees alone aren't enough reason not to use a 401(k)
, large 401 plans with $100 million or more in assets typically charge less than 1% in annual fees. This is a generally competitive rate, and the biggest plans regularly charge under 0.50%.
As plans get smaller, fees go up. The BrightScope study found that small plans often charge between 1.5% and 2% per year, with many charging in excess of 2%. While 2% may not sound like much, it adds up to a lot in the long run. If you have a $10,000 balance today and plan to add $5,000 per year to your 401 over the next 30 years, a 2% fee will cost you an estimated $153,218 over time, according to a calculator at investment websiteThe biggest fee you'll see referred to as a"401 fee" is the plan management fee. Your fees are generally deducted automatically in a way that makes it feel like you are not paying any fees at all.
Again, the fees are probably worthwhile if you get an employer match for your 401 contributions. If you can get 2%, 3%, or more of your pay added on just for saving for retirement, you should do it even if there are fees on your investments.When you're staring at the fees charged by your 401 account itself, it is easy to forget about the fees charged by each underlying investment.
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