How Much Your 401(k) Fees Are Costing You — and How To Lower Them

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These plans are popular for a number of reasons.

First, contributions are made on a pretax basis, lowering the tax bills for Americans.

Second, earnings grow tax-deferred until withdrawn, leading to larger balances.

This can boost returns more than any investment success.

To boost returns even more, its important to keep an eye out for 401(k) fees.

While any investment fees drag down performance, 401(k) expenses can be insidious.

To help prevent 401(k) fees from destroying your retirement, it pays to educate yourself.

According to theU.S.

Individual service fees apply only to plan participants who choose to use optional features within a plan.

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Plan fees can vary significantly among providers, but larger plans generally have lower fees than smaller ones.

After all, this means for every $100 you invest, you pay only $1.50 in fees.

Given those parameters, your $25,000 will grow to $163,000 over those 35 years.

Now, imagine that instead of paying 1.5% in annual expenses, you pay only 0.5%.

For one, you might take individual service fees out of the equation by avoidingoptional plan features.

Just keep in mind that a lower-fee fund isnt necessarily the best one in an overall sense.