Hidden 401(k) Fees Could Cost You Over $60,000 in Retirement: Here's How to Check Yours

For millions of workers across the US, a 401(k) is the cornerstone of retirement planning. Employees contribute regularly, employers often match part of those contributions, and the savings grow over time through long-term investing. But one overlooked detail can quietly eat away at those savings.

Annual 401(k) fees may seem insignificant at first glance. Yet over a working lifetime, they can reduce a retirement account by tens of thousands of dollars. Because many of these costs are deducted automatically from investment returns, workers often do not notice how much they are paying.

According to the US Department of Labor, even a 1% difference in annual fees can have a significant impact on retirement savings. CBS News recently highlighted how these charges can quietly erode long-term wealth if left unchecked.

Small Percentages Can Have a Big Impact

The real cost of 401(k) fees lies in compound growth. Every pound or dollar paid in fees today is money that no longer remains invested to generate returns in the future. Over decades, that lost growth becomes substantial.

The Department of Labor illustrates this with a simple example. A worker who has $25,000 in a 401(k) and 35 years until retirement could accumulate around $227,000 if annual fees are 0.5%. If annual fees rise to 1.5%, the same account would grow to only about $163,000. That is a reduction of roughly $64,000, solely because of a 1% difference in annual charges.

Many Workers Do Not Know They Pay These Fees

Despite the long-term impact, many employees remain unaware of the costs attached to their retirement accounts. A 2021 study by the US Government Accountability Office found that about four in 10 workers did not know they paid fees on their 401(k) plans.

Unlike monthly bank charges, many retirement fees are built into investment performance. They are deducted automatically, making them easy to overlook unless workers read their account documents carefully.

Understanding the Different Types of Fees

401(k) fees generally fall into three categories. Investment fees cover the cost of managing investment funds. According to the Department of Labor, these are typically deducted directly from investment returns and usually make up the largest share of total fees.

Administrative fees pay for services such as record keeping, accounting, customer support, and plan administration.

Individual service fees apply only when participants choose optional features, such as borrowing from their retirement account or completing specific transactions. Some employers pay part of these costs, while others pass some or all of them on to employees.

Fees Depend on the Employer's Retirement Plan

There is no standard fee that applies to every 401(k). Teresa Hassara, Senior Vice President of Workplace Savings and Retirement Solutions at Principal Financial Group, told CBS News that costs often vary depending on the size of an employer's retirement plan.

According to Hassara, large plans typically charge between 0.3% and 0.5%. Medium-sized plans usually range from 0.5% to 1%, while smaller plans may exceed 1% because fixed operating costs are spread across fewer employees.

Although workers cannot negotiate these fees directly, they may be able to lower overall costs by selecting lower-cost investment funds where those options are available.

Higher Fees May Also Include Extra Services

A higher fee does not automatically mean poor value. Hassara told CBS News that some providers charge more because they offer additional services, including retirement education, financial guidance, and investment support for employees. Whether those services justify the additional cost depends on the needs of the individual worker and the quality of the support provided.

How to Check Your 401(k) Fees

Reviewing retirement fees should become part of every worker's financial routine. Employers are generally required to notify employees if plan fees change, usually within 30 to 90 days, Hassara told CBS News.

Workers also receive an annual fee disclosure known as the 404(a)(5) notice, which outlines the costs associated with the retirement plan. Quarterly account statements also show many of the fees deducted from retirement savings. Employees who have questions can contact their employer's human resources department or the company that manages the retirement plan for a detailed explanation.

A Simple Review Could Protect Future Retirement Income

Most people cannot eliminate every retirement fee. However, understanding the charges, reviewing annual disclosures, and comparing available investment options can make a meaningful difference over several decades.

Small percentages may seem unimportant today. Over the course of a career, they can translate into tens of thousands of dollars that remain invested for retirement instead of being lost to fees.