Most people view a 401K plan as a “set it and forget it” kind of deal. However, this isn’t always the case. While you may be tempted to check in on your 401K’s losses or returns, you really need to take a look at the fees.
While most 401K fees seem minor, they can take a big bite out of your savings over time. This is especially true if you work for a company with less than 100 employees. Smaller businesses don’t have the experience, financial leverage, or even the time to negotiate good 401K fees for their employees. A recent study found that the average annual asset-based fee for a 401K from a small company runs as high as 2% per year. That means if you invest $10,000, you could lose $200 in fees!
What can you do about 401K fees?
Most people think they just have to accept whatever fees come with their 401K, as the terms are generally set by the employer. However, you can always ask your boss or benefit department about negotiating a better deal. Use these tips to help make sure that particular meeting goes well.
- Stay Positive – Asking your boss for lower 401K fees doesn’t have to be negative. While it may seem like you’re asking him for a big favor, or holding him over a barrel, it can actually be framed as a really good thing as better plans mean happier employees, and happier employees means a better business. Also, your boss wouldn’t be alone in a 401K negotiation. The recent market scare has spurred thousands of business to check in and rethink their 401Ks.
- Frame It As A Cost Cut – Businesses are always looking for ways to save money, so why not frame a 401K renegotiation as a way of cutting costs? Lower 401K fees could save both you and your employer millions of dollars over the course of your career. You could actually be doing your boss a favor by asking for lower fees!
- Ask For Index Funds – If your boss still won’t go for your idea of renegotiating the 401K fees, you should at the very least ask for access to low-cost index funds as these investment choices can up your return to offset the fee costs.
Don’t despair about high 401K fees. Instead, take action and make a change. After all, your 401K plan is your future.
If you’re still a bit foggy on how 401K fees work, and want to learn more, check out these resources:
- Everything You Need to Know About 401K Fees
- What Are 401K Fees?
- Understanding 401K Fees
- The Hidden Fees in 401Ks
What about you? Do you have experience with high 401K fees? If so, comment below and share what you did about it. Use your knowledge to help others through the same situation.
Be sure to check out some of our other helpful articles on topics like 401Ks and more.