Now's your chance.

Make meaningful improvements to your finances every week.

Now's your chance.

Make meaningful improvements to your finances every week.


Destroy 401k Fees – Use a 401k Fee Analyzer

If you’re not careful you can lose more than 25% of your 401k to fees. Destroy 401k fees quickly with little effort and retire a lot richer (and sooner).

Most people don’t realize it but every year fees are slowly destroying their retirement. These fees seem tiny and are often ignored.  However, over the course of time they can cause serious damage.  If you’re contributing regularly to your 401k (and I really hope you are!), you should be very concerned.  To protect your retirement you need to destroy 401k fees.

Fortunately, destroying 401k fees is easy and not very time consuming at all.  You can definitely look at the prospectus of each 401k fund you have by hand but I never really want to spend so much time tweaking my 401k.  So, for the sake of this post I’m going to walk you though the awesome tool I use.

Detect 401k Fees

401k Fee Graph

Small fees compound over time

Personal Capital is a new tool that sits in the Mint.com space.  They don’t do budgeting but they have a bunch of cool graphs and pictures to explain your money situation.  I think they still have a ways to go with their money tracking tools but their 401k Fee Analyzer is top notch.

You can visit their site, register your account and add in financial institutions much like Mint.  From there you’ll go to the Investments header in the top right, and click 401k Fee Analyzer.  On the page you’ll be greeted with an awesome graph of your potential 401k earnings.

I’ve put my sample data contribution rates in there along with my age and I selected 1% as an even number to evaluate the impact of fees.  If I paid only 1% to fees in my 401k portfolio, fees would consume a whopping 28% of my future earnings, basically

401k Fee Assumptions

Easily adjust the graph to represent your situation

shaving off a cool $1 million from my retirement account!  That is not ok.  If you want to check out your own situation, you can easily adjust the numbers with their Edit Assumptions section.

Using this tool has been eye opening for me.  Until last week I had no idea I was basically giving away so much of my hard earned money for no reason.  Beyond the cool graphs, the best part of the tool is how it aggregates all of your funds, charts each out with its fees as well as finds out your overall fee percent.  From there it is pretty easy to see who the culprits are.

Now that we’ve found the funds that are stealing our retirement money we need to do something about it!

Destroy 401k Fees

401k Fee Rate

I think it’s rather easy to beat 0.50% if you try

Remember, the fees will sink you and any fee is too much.  Even the Personal Capital bench mark at 0.50% would still be a lot.  Based on my same base numbers, I would still lose roughly 13% to fees… not acceptable.

From the research I’ve done, there are plenty of popular funds that have near zero fees.  For example, my personal favorite, Vanguard, has plenty of mutual funds at 0.20%.  Not only are Vanguard’s fees very low but their performance is excellent.

I  think you can do even better.  For example, in my portfolio I have a fund called Blackrock Equity Index Fund H and it only has 0.07% fees.  Now that’s a good deal!  Better yet, it’s returned over 8% over the course of it’s life and 16% just last year.

Retire With More For Less

Most people set their 401k up once and hardly look at fund returns before they set their allocations.  After that, they never log back in and check again.  If you did that, just take five minutes and optimize your retirement savings.  There is a huge difference between 1% and 0.50%.  For me that difference is $500,000 and for you it may be even more.  Don’t throw your retirement savings away, destroy 401k fees!

Have you tried Personal Capital?  Share your experience with us in the comments!

Subscribe and have your financial mind blown.

Get all the things that are free and awesome, in your inbox.

It's about time you got your shit together.

  • Last year I made a small change to avoid the fees. I stopped a percentage fee and replaced it with a flat fee of $1 per month. My investing is less automatic, but I am willing to take 2-3 minutes per month to save money.

    • Interesting, I thought the fee was on the fund level. Care to provide more details?

  • My 401k administrator has terrible fees, but what can you do? The company chooses the plan administrator, not you.

  • i have noticed there can be a double-whammy of fees… those taken from the administrator, and then those from the funds themselves.. i try to choose funds with low fees myself, altho i do weight performance into the equation as well..

  • Brett @ wstreetstocks

    Very interesting analysis. Your graphics were very useful. Interesting to see how small fees add up over time.

  • I currently invest in Vanguard. Most of their fees appear to be under 0.50% but none are fixed. I never thought that it would account for such a large impact over time.

    • Yea, Vanguard is usually the way to go. The cool thing is, they’re a not for profit corporation so they are actually incentivized to keep their rates low.

      I didn’t know how high the fees were from other mutual funds either, that’s why I really found this tool so helpful. After I saw how much money I was losing, I felt like a sucker and optimized it. I hope everyone else does they same!

  • I recently signed up with Personal Capital and I’m appalled to think my Traditional 401(K) account could be over %20 less in admin fees! Especially since I’ll be taxed when I liquidate (did I use that term correctly?) at age 65 or 75 or 150 or whenever my 36-year-old-ass can afford to retire. (I’ve put age 55 into their retirement calculator below… it’s nice to think I could afford to retire a little early.)

    I’ve actually just written to Empower Retirement to see what my options are for: choosing fee caps on the funds they choose under my managed plan (currently they range between .3 and .96%); or if I have the freedom to choose one or more index funds that will always be included in my managed plan.

    The admin fees are less than $14 per quarter, which seems average.

    • Correct, you’ll also be taxed when you liquidate your account and yes, you should be appalled. Being a 401k provider is a big business cause they milk fees out of tons of employees. Knowledge being on your side you can definitely start with picking lower cost funds in your plan to help drop that 22% number to something closer to 15%.

      Research was the hard part – switching your allocations and funds should be pretty easy through your 401k provider.

      Grats on getting thousands of dollars more in retirement with only a few hours of work!

    • jb1907

      You will have to start to pull money out at 70.5. Hopefully you can roll the 401K to something better when you leave the job.

      • Thanks jb. :) Not sure how long I’ll be at my current job, but I do very much like my employer. Fortunately, since I posted this screen grab I was able to adjust my 401K to minimize fees. I’m now quite comfortable with the low-ish partially-employer-subsidized fees, and I am largely invested in a Large Cap Blend fund at a .03% expense ratio. Thank goodness for what a year and awareness can do.

        • jb1907

          Can’t beat .03% with a Large Cap Blend……

  • Fees truly eat at returns over time. Got to respect and love financial innovation over the past decade (prevalence of index funds and ETFs) over the huge fees charged by mutual funds back in the day.

    • jb1907

      almost nobody has an ETF choice in their 401K.

      • I did when I worked for Barclays Capital. Depends if you’ve got a savvy rep or not.

        • jb1907

          How did that work when the money got transferred to the 401K. Was the ETF bought within minutes or the next day at the opening of the market? I have a pretty lame 457 with lame choices.

          • Hmm, good question. Generally new contributions come on payday and happen obscenely early in the morning on that day so I’m guessing it all went down then. I don’t have ETFs offered at my current job so I can’t check anymore.

          • jb1907

            That is my only concern if I had an ETF option is when would funds be purchasing the ETF. At least with a mutual fund, the NAV settles at the end of the day so it doesn’t matter when the money gets to the fund. I guess that is why you really can’t buy stocks in a 401K if that person isn’t in control of getting the money to the account.

  • jb1907

    The problem is we have zero control over the 401k funds or fees in our company accounts.

    • While you don’t have high level control over the basket of funds your company selects, you do have a choice within those funds. There are plenty of excessively expensive funds with average performance that you can ditch for a cheap fund with average performance. Best part is checking takes minimal effort.