The fees for 401(k) plans vary by size, with plans overseeing more assets with more participants generally charging a lower overall percentage. Generally, between 0.05% and 10% of the total amount of assets goes towards fees. A significant proportion will go to the advisor of the plan.
The average 401(k) plan returns between 5% and 8% based on market conditions. However, because the returns on a 401(k) plan are based on the success of the investment portfolio, you can see much higher or lower returns depending on the investments and the overall market. The average employer match for a 401(k) plan is 4.7% of the employee's pay, as of 2019. However, there are many different matching systems used; some employers contribute $0.50 for every $1 an employee puts in. Others may use this $0.50 / $1 system only up to 6% of the employees salary. The administration fees charged by a 401(k) plan advisor vary widely. Some charge as little as 0.05% of the total assets, where others may charge 7% or more. Generally, the more assets being overseen and the more participants, the smaller the percentage taken as a fee.Average Returns on 401(k) Plans
What Is the Average Employer Match to 401(k) Plan?
Average 401(k) Plan Administration Fees
Average 401(k) Fees by Plan Size FAQs
The average fee for 401(k) plans can vary depending on the size of the plan. Generally, for smaller plans (less than $250,000 in assets), the average fee is around 1% of total assets; for larger plans (over $500,000 in assets), the average fee drops to 0.6%.
A typical 401(k) will include administrative fees such as asset-based fees and advisor/record-keeping fees, as well as investment management expenses that cover actively managed funds or index fund investments.
For smaller plans (less than $250,000 in assets), the average fee is around 1% of total assets; for larger plans (over $500,000 in assets), the average fee drops to 0.6%. The difference in fees reflects economies of scale that can be achieved when operating a larger plan.
Yes, some 401(k) plans may have additional costs such as participant-level fees which are charged per participant, or mutual fund exchange fees and commissions. Other potential fees include setup and termination fees or loan-processing charges.
A 401(k) plan provides potential tax savings, as contributions and earnings on investments can be sheltered from taxes until they are withdrawn. It also helps employers attract and retain quality employees by offering an attractive retirement savings option. Additionally, it enables workers to save for retirement without having to make a large upfront contribution. Finally, many 401(k) plans include employer-matching contributions to incentivize employees to save for retirement.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.