401(k) Fees: Types, Costs, and How to Reduce Hidden Charges in 2025

Saving through a 401(k) plan is one of the most effective ways to prepare for retirement. Contributions are often matched by your employer, the money grows tax-deferred, and over decades, even small deposits can grow into a large nest egg. But one factor many people overlook is the cost of maintaining the account.

401(k) fees may look small—often less than 1%—but they have a huge long-term effect. Even a tiny percentage difference can cut your retirement savings by tens of thousands of dollars. The good news is that once you understand what types of 401(k) fees exist and where to find them, you can take steps to lower the costs.

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Types of 401(k) Fees

Every 401(k) plan has fees. They are the price of keeping the account running, managing the funds, and giving you access to services. 401(k) fees usually fall into three categories: investment fees, administrative fees, and individual service fees.

Investment Fees

Investment fees are the largest cost for most savers. These cover the management of the funds where your contributions are invested. If you put funds into a mutual fund or index fund inside your 401(k), you will pay what’s known as the expense ratio.

• An actively managed mutual fund might charge 0.75% or even more.

• A passively managed index fund could charge as little as 0.05%.

The plan difference may not sound big, but over 30 years, a 0.7% gap can add up to tens of thousands of dollars in lost growth. For this reason, experts often recommend choosing low-cost index funds whenever possible.

Administrative Fees

Running a retirement plan costs money. Employers or plan providers must handle record-keeping, compliance with federal laws, website access, and customer support. These charges are bundled as administrative fees.

Some companies pay administrative fees on behalf of employees, while others split the cost across all participants. You may see these charges as a flat monthly dollar amount or as a percentage of the account balance. Even though they might seem small, they add up year after year.

Individual Service Fees

Some fees are charged only if you use specific services. For example:

• Taking a loan from your 401(k).

• Processing a hardship withdrawal.

• Requesting a paper statement.

• Making frequent trades.

These individual service fees are avoidable in most cases. If you know they exist, you can make smarter choices that keep money in your account.

How to Find Your 401(k) Fees

Many people never check what they’re paying. They assume the employer handles everything. But understanding your 401k cost is essential.

Here’s how to track them down:

1. Read your statements carefully. Look for a section that shows “plan fees” or “investment expenses.”

2. Check the annual disclosure. By law, employers must provide a document (known as a 404(a)(5) notice) that lists fees in detail.

3. Ask HR or your plan administrator. If the documents are confusing, request clarification in plain language.

4. Use online calculators. A tool like PocketGuard’s free budget calculator can help you project the impact of fees on your retirement.

The bottom line: if you do not actively look for fees, you will never notice them, but they quietly reduce your long-term savings.

How to Reduce 401(k) Management Fees

You cannot avoid all fees, but you can keep them as low as possible. A few smart funds moves include:

• Pick lower-cost funds. If your plan offers index funds or ETFs, favor those over actively managed options.

• Review your investment menu. Many employees choose funds once and never look again. Switching to cheaper funds can save thousands.

• Avoid optional services. Stick to digital statements and avoid unnecessary loans or hardship withdrawals.

• Consolidate old accounts. Having multiple 401(k)s from past jobs can mean duplicate fees. Rolling them into a single account often reduces costs.

• Talk to HR. Some employers are open to renegotiating with providers if enough employees express concerns about high fees.

Even a 0.25% reduction can make a difference. Over decades, that small percentage could mean an extra year of income during retirement.

How Much Can Fees Affect My Retirement Savings?

The effect of 401(k) fees compounds over time. Let’s look at an example we offer:

• Worker A invests $100,000 with 0.5% in fees. After 30 years at a 7% return, the account grows to about $574,000.

• Worker B invests the same amount but pays 1.5% in fees. After 30 years, the account grows to only about $432,000.

That is a $142,000 difference—funds lost entirely to fees.

This shows why monitoring average 401k fees matters. The less you lose to charges, the more you keep for yourself.

Here’s an example of how fees affect a $100,000 investment over 30 years with a 7% average annual return:

As you can see, even half a percent makes a six-figure difference in the long run. The less you pay in fees, the more money stays invested and grows for your future.

What Are Normal 401(k) Fees?

So what should you expect? Studies show that the average 401k fees range from about 0.5% to 2% annually.

• Large employers with thousands of participants often negotiate fees as low as 0.3% to 0.5%.

• Small employers may have plans closer to 1% or more.

A good rule of thumb: if you are paying above 1%, ask questions. Fees vary widely by provider, but competition is growing, and many plans now offer lower-cost options than before.

Hidden 401(k) Fees

Not all costs are obvious. Some are buried in fund expenses or bundled into the provider’s pricing. Examples include:

• Revenue sharing agreements where fund companies pay providers behind the scenes.

• Trading costs within actively managed funds that are not clearly reported.

• Wrap fees that combine multiple charges into one line item without explanation.

These “hidden fees” make it harder for employees to compare plans. But they are real, and they can silently eat away at your savings. Always ask your HR or plan administrator to break down exactly what you’re paying.

Common 401(k) Assumptions Debunked

There are several myths about 401(k) fees that can cost savers funds:

• “Fees don’t matter if returns are strong.” False. Even in a booming market, fees still reduce your growth.

• “All plans are the same.” False. Two companies may use the same provider but have very different costs.

• “I can’t do anything about it.” False. You can choose low-cost funds within your plan, roll over old accounts, or talk to HR.

If your plan is expensive, you might also consider alternatives like IRAs. In some cases, people decide to cancel 401k contributions temporarily and save in lower-cost accounts instead.

Final Thoughts

401(k) fees might look small, but their long-term impact is huge. By knowing what types of fees exist, checking your plan documents, and making smart choices, you can protect your future retirement savings.

The less you pay in fees, the more of your money stays invested and growing. Don’t wait—review your account today and make adjustments if needed. A little effort now can add years of financial security later.