A good 401(k) expense ratio is under 0.10% for index funds, under 0.20% for target-date funds, and under 0.50% for actively managed funds. According to the 2025 ICI study, the average 401(k) equity mutual fund expense ratio was 0.26% in 2024 — but expense ratios are only one of at least five fee layers most participants pay.
Here's what that means in real money: a 1% difference in annual fees costs approximately $469,000 over a 30-year career on a $200,000 portfolio with $10,000 in annual contributions. That's more than twice the original balance — going to fee layers that many participants aren't fully aware of.
That's the cost side. But cost is only half the equation. The real question isn't just "how much am I paying?" — it's "how much am I paying, for what services, and is the value worth it?" A 401(k) with higher fees that includes strong fund options, employer matching, and access to financial advice may still be a better deal than a bare-bones plan with rock-bottom costs. Keep that three-variable lens — how much, for what, is it worth it — in mind as you read every benchmark in this guide.
No tool replaces good financial advice. But every investor deserves to see the full picture — and the source of that picture matters. This guide was built by a team with zero revenue from plan providers, fund companies, or advisor referrals, which means every fee layer is shown without a financial incentive to hide anything. It breaks down what you're actually paying, how to find every fee layer, and what to do if the numbers don't match the value.
What are 401(k) expense ratios — and why should you care?
An expense ratio is the annual percentage fee a mutual fund or ETF charges to cover operating costs — management, administration, and distribution. It's automatically deducted from the fund's returns before you see them. If your fund earns 8% and charges a 0.50% expense ratio, you see 7.50%.
The numbers are significant. At year-end 2024, 401(k) plan assets totaled $8.9 trillion, with approximately 70 million active participants across more than 715,000 plans. Even small percentage differences move enormous amounts of money at that scale.
The good news: expense ratios have dropped dramatically. Average equity mutual fund expense ratios incurred by 401(k) participants fell 66% over 24 years — from 0.76% in 2000 to 0.26% in 2024. As Sarah Holden, Senior Director of Retirement and Investor Research at the ICI, noted in July 2025: "The long-term downward trend in mutual fund fees for more than two decades is great news for investors looking to secure their financial future."
So if fees are falling, why does this still matter?
But here's the thing: the expense ratio you see on your statement is only part of the story. For a broader look at how fees, taxes, and behavioral costs add up, see our guide to the true cost of investing. A FINRA Investor Education Foundation study found that investors with the lowest financial literacy scores pay fees more than 10 times higher than those with the highest literacy. Understanding what you're paying is the first step toward paying less.
Every fee layer in your 401(k), explained
Most 401(k) participants think they're paying one fee — the expense ratio. If you've ever wondered why 401(k) fees are so high, the structural answer is layering: as fee-only financial planners frequently note, there are actually at least five layers, and some are not immediately visible in standard disclosures.
Here's a real-world example of how those layers add up.
Consider a mid-career professional with $150,000 in her 401(k). She checks her fund's expense ratio — 0.35% — and feels fine about it. What she doesn't see: a 0.10% 12b-1 fee, a 0.15% sub-transfer agent fee, a $75 quarterly administrative charge, and revenue sharing that adds another 0.10%. Her actual all-in cost is closer to 0.90% — more than $1,350 a year, not the $525 she'd estimate from the expense ratio alone. Whether your balance is $15,000 or $500,000, the same fee layers apply — only the dollar amounts change. Whether you're five years into your career or five years from retirement, the same five-layer structure applies — only the dollar amounts and the urgency of the math change.
Here's what's stacked on top of the expense ratio you already know about:
Layer 1: The expense ratio. This is the one you can see — the fund's annual operating cost. For a 401(k) equity fund in 2024, the average was 0.26% according to ICI data.
Layer 2: 12b-1 fees. These are annual marketing and distribution charges of 0.25%–0.75%, named after the SEC rule that permits them. The good news: 92% of new long-term mutual fund gross sales in 2024 went to funds without 12b-1 fees. The less good news: legacy funds in many 401(k) plans still carry them.
Layer 3: Sub-transfer agent fees. These are payments from fund companies to recordkeepers for maintaining participant accounts and processing transactions — typically 0.10%–0.35%. They're often invisible because they're embedded in the fund's expense ratio or offset through revenue sharing.
Layer 4: Administrative fees. These cover recordkeeping, compliance testing, legal services, plan audit fees, and participant communications. They can be flat dollar amounts ($25–$75 per quarter) or asset-based percentages. Plans with 100+ eligible participants are generally required to have an annual audit, and the cost — typically $5,000–$20,000 depending on plan size — is often passed through to participants. Sometimes your employer pays them. Sometimes they're quietly deducted from your balance.
Layer 5: Revenue sharing. This is the layer that ties the others together. Revenue sharing is an arrangement where fund companies pay a portion of their expense ratio to the plan's recordkeeper as compensation for including the fund in the plan's investment lineup. This is one reason your 401(k) might have expensive active funds instead of cheap index funds. According to the Deloitte/ICI study on DC plan fee structure, asset-based investment-related fees represent approximately 74% of total defined contribution plan fees — and participants pay about 91% of total plan costs.
One additional cost structure to be aware of: some plans charge a wrap fee (also called a bundled fee) that combines investment management, recordkeeping, and advisory services into a single asset-based charge — typically 0.50%–1.50%. The alternative is a direct fee (or unbundled) structure, where each service is priced separately. Wrap fees can be simpler to understand but harder to benchmark, since you can't easily compare the cost of individual components. If your plan uses a wrap fee structure, ask your HR department what services are included and whether the total cost is competitive with unbundled alternatives.
So what does this actually look like when you add it all up?
Here's what these layers look like when stacked together:
Plan scenario | Expense ratio | 12b-1 fee | Sub-TA fee | Admin fee | Revenue sharing | All-in cost |
|---|---|---|---|---|---|---|
Low-cost (large employer) | 0.05% | 0.00% | 0.00% | 0.10% | 0.05% | 0.20% |
Average plan | 0.26% | 0.05% | 0.10% | 0.20% | 0.10% | 0.71% |
High-cost (small employer) | 0.75% | 0.15% | 0.25% | 0.35% | 0.25% | 1.75% |
Worst-case plan | 1.00% | 0.25% | 0.35% | 0.50% | 0.40% | 2.50% |
On a $100,000 balance, that "average" all-in cost of 0.71% means $710 per year — nearly 3× the $260 you'd estimate from the expense ratio alone. In a high-cost small plan, it's $1,750 per year. Exact component breakdowns vary by plan, but the pattern is consistent: the expense ratio you see is roughly one-third of what you actually pay.
A note on the data: the median all-in figure of 0.67% comes from the most recent Deloitte/ICI study, last updated around 2014. Fees have continued to decline since then, so current all-in costs may be lower for participants in large plans. The directional pattern — multiple fee layers stacking well above the visible expense ratio — is consistent across all available data.
This isn't fraud — it's fragmentation. Fee structures weren't built to surface every cost in one place. But when costs are spread across five different layers, reported in different documents, and deducted at different times, the effect is the same: most participants have limited visibility into what they're actually paying.
Consumer advocates agree that disclosure alone hasn't solved the problem. The AARP Foundation has consistently advocated for stronger ERISA enforcement, arguing that fiduciary duties of loyalty and prudence exist to protect retirement savings from excessive or opaque fees.
Here's where you can start to see your own numbers.
Want to see your own fee layers? Use the fee impact table in the next section to estimate your all-in cost — or see how Fee X-Ray reveals every dollar across all your accounts, with zero conflicts of interest. Unlike free 401(k) fee calculators that collect your personal information before showing results, Truthifi's tools show your actual fee layers with no upsell and no personal data collection.
A good 401(k) expense ratio is under 0.10% for index funds, under 0.20% for target-date funds, and under 0.50% for actively managed funds. According to the 2025 ICI study, the average 401(k) equity mutual fund expense ratio was 0.26% in 2024 — but expense ratios are only one of at least five fee layers most participants pay.
Here's what that means in real money: a 1% difference in annual fees costs approximately $469,000 over a 30-year career on a $200,000 portfolio with $10,000 in annual contributions. That's more than twice the original balance — going to fee layers that many participants aren't fully aware of.
That's the cost side. But cost is only half the equation. The real question isn't just "how much am I paying?" — it's "how much am I paying, for what services, and is the value worth it?" A 401(k) with higher fees that includes strong fund options, employer matching, and access to financial advice may still be a better deal than a bare-bones plan with rock-bottom costs. Keep that three-variable lens — how much, for what, is it worth it — in mind as you read every benchmark in this guide.
No tool replaces good financial advice. But every investor deserves to see the full picture — and the source of that picture matters. This guide was built by a team with zero revenue from plan providers, fund companies, or advisor referrals, which means every fee layer is shown without a financial incentive to hide anything. It breaks down what you're actually paying, how to find every fee layer, and what to do if the numbers don't match the value.
What are 401(k) expense ratios — and why should you care?
An expense ratio is the annual percentage fee a mutual fund or ETF charges to cover operating costs — management, administration, and distribution. It's automatically deducted from the fund's returns before you see them. If your fund earns 8% and charges a 0.50% expense ratio, you see 7.50%.
The numbers are significant. At year-end 2024, 401(k) plan assets totaled $8.9 trillion, with approximately 70 million active participants across more than 715,000 plans. Even small percentage differences move enormous amounts of money at that scale.
The good news: expense ratios have dropped dramatically. Average equity mutual fund expense ratios incurred by 401(k) participants fell 66% over 24 years — from 0.76% in 2000 to 0.26% in 2024. As Sarah Holden, Senior Director of Retirement and Investor Research at the ICI, noted in July 2025: "The long-term downward trend in mutual fund fees for more than two decades is great news for investors looking to secure their financial future."
So if fees are falling, why does this still matter?
But here's the thing: the expense ratio you see on your statement is only part of the story. For a broader look at how fees, taxes, and behavioral costs add up, see our guide to the true cost of investing. A FINRA Investor Education Foundation study found that investors with the lowest financial literacy scores pay fees more than 10 times higher than those with the highest literacy. Understanding what you're paying is the first step toward paying less.
Every fee layer in your 401(k), explained
Most 401(k) participants think they're paying one fee — the expense ratio. If you've ever wondered why 401(k) fees are so high, the structural answer is layering: as fee-only financial planners frequently note, there are actually at least five layers, and some are not immediately visible in standard disclosures.
Here's a real-world example of how those layers add up.
Consider a mid-career professional with $150,000 in her 401(k). She checks her fund's expense ratio — 0.35% — and feels fine about it. What she doesn't see: a 0.10% 12b-1 fee, a 0.15% sub-transfer agent fee, a $75 quarterly administrative charge, and revenue sharing that adds another 0.10%. Her actual all-in cost is closer to 0.90% — more than $1,350 a year, not the $525 she'd estimate from the expense ratio alone. Whether your balance is $15,000 or $500,000, the same fee layers apply — only the dollar amounts change. Whether you're five years into your career or five years from retirement, the same five-layer structure applies — only the dollar amounts and the urgency of the math change.
Here's what's stacked on top of the expense ratio you already know about:
Layer 1: The expense ratio. This is the one you can see — the fund's annual operating cost. For a 401(k) equity fund in 2024, the average was 0.26% according to ICI data.
Layer 2: 12b-1 fees. These are annual marketing and distribution charges of 0.25%–0.75%, named after the SEC rule that permits them. The good news: 92% of new long-term mutual fund gross sales in 2024 went to funds without 12b-1 fees. The less good news: legacy funds in many 401(k) plans still carry them.
Layer 3: Sub-transfer agent fees. These are payments from fund companies to recordkeepers for maintaining participant accounts and processing transactions — typically 0.10%–0.35%. They're often invisible because they're embedded in the fund's expense ratio or offset through revenue sharing.
Layer 4: Administrative fees. These cover recordkeeping, compliance testing, legal services, plan audit fees, and participant communications. They can be flat dollar amounts ($25–$75 per quarter) or asset-based percentages. Plans with 100+ eligible participants are generally required to have an annual audit, and the cost — typically $5,000–$20,000 depending on plan size — is often passed through to participants. Sometimes your employer pays them. Sometimes they're quietly deducted from your balance.
Layer 5: Revenue sharing. This is the layer that ties the others together. Revenue sharing is an arrangement where fund companies pay a portion of their expense ratio to the plan's recordkeeper as compensation for including the fund in the plan's investment lineup. This is one reason your 401(k) might have expensive active funds instead of cheap index funds. According to the Deloitte/ICI study on DC plan fee structure, asset-based investment-related fees represent approximately 74% of total defined contribution plan fees — and participants pay about 91% of total plan costs.
One additional cost structure to be aware of: some plans charge a wrap fee (also called a bundled fee) that combines investment management, recordkeeping, and advisory services into a single asset-based charge — typically 0.50%–1.50%. The alternative is a direct fee (or unbundled) structure, where each service is priced separately. Wrap fees can be simpler to understand but harder to benchmark, since you can't easily compare the cost of individual components. If your plan uses a wrap fee structure, ask your HR department what services are included and whether the total cost is competitive with unbundled alternatives.
So what does this actually look like when you add it all up?
Here's what these layers look like when stacked together:
Plan scenario | Expense ratio | 12b-1 fee | Sub-TA fee | Admin fee | Revenue sharing | All-in cost |
|---|---|---|---|---|---|---|
Low-cost (large employer) | 0.05% | 0.00% | 0.00% | 0.10% | 0.05% | 0.20% |
Average plan | 0.26% | 0.05% | 0.10% | 0.20% | 0.10% | 0.71% |
High-cost (small employer) | 0.75% | 0.15% | 0.25% | 0.35% | 0.25% | 1.75% |
Worst-case plan | 1.00% | 0.25% | 0.35% | 0.50% | 0.40% | 2.50% |
On a $100,000 balance, that "average" all-in cost of 0.71% means $710 per year — nearly 3× the $260 you'd estimate from the expense ratio alone. In a high-cost small plan, it's $1,750 per year. Exact component breakdowns vary by plan, but the pattern is consistent: the expense ratio you see is roughly one-third of what you actually pay.
A note on the data: the median all-in figure of 0.67% comes from the most recent Deloitte/ICI study, last updated around 2014. Fees have continued to decline since then, so current all-in costs may be lower for participants in large plans. The directional pattern — multiple fee layers stacking well above the visible expense ratio — is consistent across all available data.
This isn't fraud — it's fragmentation. Fee structures weren't built to surface every cost in one place. But when costs are spread across five different layers, reported in different documents, and deducted at different times, the effect is the same: most participants have limited visibility into what they're actually paying.
Consumer advocates agree that disclosure alone hasn't solved the problem. The AARP Foundation has consistently advocated for stronger ERISA enforcement, arguing that fiduciary duties of loyalty and prudence exist to protect retirement savings from excessive or opaque fees.
Here's where you can start to see your own numbers.
Want to see your own fee layers? Use the fee impact table in the next section to estimate your all-in cost — or see how Fee X-Ray reveals every dollar across all your accounts, with zero conflicts of interest. Unlike free 401(k) fee calculators that collect your personal information before showing results, Truthifi's tools show your actual fee layers with no upsell and no personal data collection.
The smartest money move you can make? Run a wellness check.
Truthifi® tests your finances for 100+ risks and opportunities—automatically. Unlock plain-English insights that drive smarter financial decisions today.
The smartest money move you can make? Run a wellness check.
Truthifi® tests your finances for 100+ risks and opportunities—automatically. Unlock plain-English insights that drive smarter financial decisions today.
The smartest money move you can make? Run a wellness check.
Truthifi® tests your finances for 100+ risks and opportunities—automatically.
What is a good expense ratio? Benchmarks by fund type
"Good" depends entirely on what type of fund you're looking at. Here are the benchmarks, based on 2024 data from the ICI and industry research:
Fund type | Good (low-cost) | Average | High (evaluate value) |
|---|---|---|---|
Index equity mutual funds | 0.03–0.10% | 0.05% (asset-weighted) | >0.20% |
Index ETFs | 0.03–0.10% | 0.14% (asset-weighted) | >0.25% |
Actively managed equity | 0.40–0.75% | 0.60% (asset-weighted) | >1.00% |
Target-date funds | 0.10–0.25% | 0.29% (401(k) avg, 2024) | >0.50% |
Bond funds | 0.03–0.10% | 0.10% (index avg) | >0.50% |
Federal TSP | 0.036–0.043% | — | N/A (benchmark) |
A few things worth noting. Target-date fund expense ratios have dropped 57% since 2008 — from 0.67% to 0.29% in 2024. Not all fees are getting worse. Some categories are improving rapidly.
But plan size matters more than most people realize. According to the 401(k) Averages Book (2025), as reported by Kiplinger, a $5 million plan has average total costs of 1.08% (including 0.37% in adviser compensation), while a $50 million plan costs 0.76%.
Morningstar data shows the range stretches from 0.27% for plans above $1 billion to 1.26% for plans under $1 million — only 8% of participants are in the smallest plans, so most readers are in better shape than the worst case. Still, if you work for a smaller company, you're likely paying a "small plan premium" that has nothing to do with the funds themselves.
Truthifi's Score runs 100+ diagnostic checks — including fee analysis most platforms skip — so you can compare your plan against these benchmarks in minutes.
The $469,000 question: how fees and value compound over a career
The difference between a low-cost and a high-cost 401(k) isn't a rounding error. It's a house.
And here's the number that puts it in perspective.
Here's what happens to a $200,000 portfolio with $10,000 in annual contributions over 30 years at a 7% nominal return, depending on the all-in fee level:
Fee level | Annual fee | Year 10 | Year 20 | Year 30 | Cost vs. 0.10% fee |
|---|---|---|---|---|---|
Very low (index) | 0.10% | $527,282 | $1,165,105 | $2,408,121 | Baseline |
Low | 0.25% | $520,878 | $1,137,499 | $2,322,441 | $85,679 |
Below average | 0.50% | $510,372 | $1,092,982 | $2,186,622 | $221,499 |
Average (401(k) equity ER) | 0.67% | $503,346 | $1,063,744 | $2,099,017 | $309,104 |
Median all-in | 0.75% | $500,073 | $1,050,267 | $2,059,068 | $349,052 |
High | 1.00% | $489,977 | $1,009,283 | $1,939,280 | $468,841 |
Very high | 1.25% | $480,082 | $969,961 | $1,826,787 | $581,334 |
Excessive | 1.50% | $470,382 | $932,235 | $1,721,145 | $686,976 |
Even the gap between the "average" expense ratio of 0.26% and the median all-in cost of 0.67% is over $100,000 across a career. The gap between 0.10% and 1.00% — a range that captures most participants — is approximately $469,000. Even on a $50,000 starting balance with $5,000 in annual contributions, the same 1% fee difference compounds to approximately $117,000 over 30 years — real money at every balance level.
Those numbers represent the compound impact of fees — and they're worth understanding clearly. But they're only the cost side of the equation. Research from Vanguard's Advisor's Alpha estimates that good financial advice can add approximately 3% in net returns annually — with behavioral coaching alone worth roughly 1.5%. Russell Investments' value-of-advisor research puts the figure even higher at ~3.54% across rebalancing, coaching, planning, and tax management. A 401(k) plan that costs 0.75% but connects you with quality financial advice and strong fund options may deliver far more value than a bare-bones plan at 0.10%.
Service | Est. annual value | Source |
|---|---|---|
Behavioral coaching (staying the course, avoiding panic selling) | ~1.50% | Vanguard Advisor's Alpha |
Tax-efficient investing and withdrawal strategies | ~0.75% | Vanguard Advisor's Alpha |
Rebalancing and asset allocation | ~0.35% | Vanguard Advisor's Alpha |
Retirement income planning and financial planning | ~0.94% | Russell Investments |
Total estimated advisor value | ~3.00–3.54% | Vanguard / Russell |
The takeaway: a 1% fee costs you 1% — but the right advice can return 3%. The math only works when you look at both sides.
When fees exceed your tax advantage
Here's where it gets interesting: at a certain fee level, the 401(k) tax advantage itself can be reduced to zero. A pre-tax 401(k) with high fees can actually produce worse after-tax outcomes than a low-cost taxable brokerage account.
The breakeven thresholds, based on comparing a 401(k) (pre-tax contribution, taxed at withdrawal) against a taxable brokerage account (after-tax contribution, capital gains treatment at 0.05% fee):
22% tax bracket: ~1.3% all-in fee
24% tax bracket: ~1.3% all-in fee
32% tax bracket: ~1.5% all-in fee
Above these thresholds, above-match dollars may produce better long-term results in a low-cost taxable account. This doesn't mean you should abandon your 401(k) — the employer match is still free money. But it does change the math for your above-match contributions.
How fee drag interacts with the employer match
Even a generous employer match has limits against sustained high fees. With a typical 50% match on 6% of salary ($75,000 salary, $2,250 annual match, 7% return), the match breaks even with fee drag at approximately 1.00% all-in fees over 30 years. A 100% match on 6% extends the breakeven to about 1.50%.
The takeaway: always capture your full employer match — that's an immediate return that almost always outweighs fee drag in the short term. But over a full career, the compound impact of fees on the entire growing balance can exceed the match value. That's why knowing your all-in cost matters.
Truthifi's Dashboard monitors fee changes continuously — so you can track what's happening to your plan costs year over year, not just in a one-time snapshot.
How to find your 401(k) fees: step-by-step
If you've tried to find your fees and felt overwhelmed, you're in good company.
Finding your 401(k) hidden fees shouldn't require a forensic accounting degree — but it sometimes feels that way. If you've struggled to find your fees, you're not alone. A 2021 Government Accountability Office study found that almost 40% of 401(k) participants don't fully understand fee information in disclosures. Even more striking: 45% can't use the disclosure to determine their investment fee, and 41% incorrectly believe they don't pay any 401(k) fees at all. A follow-up GAO report in 2024 confirmed that multiple stakeholder groups still have concerns about whether participants understand these documents.
The Department of Labor estimated the present value of benefits from fee disclosure rules at approximately $14.9 billion over ten years. The intention was good. The execution hasn't reached most participants.
Here's how to find every layer:
Step 1: Find your annual fee disclosure (404(a)(5) notice). Your plan is legally required to send this at least once per year. It lists every investment option in your plan, its expense ratio, and any plan-level fees. Check your email or plan portal — it's often buried in a document labeled "Annual Participant Disclosure" or similar.
Step 2: Review your quarterly statements. Look for line items showing dollar amounts deducted from your account. Administrative fees often appear here as flat charges. If you see "plan fees" or "recordkeeping fees" deducted from your balance, that's your Layer 4.
Step 3: Check individual fund fact sheets. Log into your plan's online portal and pull the fact sheet or prospectus for each fund you're invested in. Look for the expense ratio, 12b-1 fees (often listed under "Distribution Fees"), and any sub-transfer agent fees.
Step 4: Request the 408(b)(2) disclosure from HR. This is the service provider disclosure your plan sponsor receives — it shows what the recordkeeper and other service providers are being paid. Not every HR department will hand this over readily, but you have a right to understand how your plan operates. Approach the conversation constructively: most employers want to offer a good plan but are working within a complex system.
Step 5: Add the layers. Once you have expense ratios (Layer 1), 12b-1 fees (Layer 2), sub-TA fees (Layer 3, if visible), administrative fees (Layer 4), and an estimate of revenue sharing (Layer 5), add them together. Compare the total to the benchmarks in the table above. You can also look up your plan's overall rating on BrightScope (now part of ISS Market Intelligence), which scores 401(k) plans based on costs, participation rates, and investment quality — or use Morningstar to check individual fund expense ratios and performance history.
For a deeper look at hidden fees beyond the expense ratio, see our complete guide to investment fee layers. You can also review Truthifi's glossary of investment terms for definitions of any unfamiliar concepts.
Provider comparison: Fidelity, Vanguard, Empower, Schwab, and more
Not all 401(k) providers charge the same fees — and the range is wider than you might expect.
Vanguard sets the low-cost benchmark with an average expense ratio of 0.06% across all funds as of February 2026, after cutting fees on more than 60% of its funds in 2025–2026 — saving investors approximately $600 million over two years. The Federal Thrift Savings Plan (TSP) is even cheaper at 0.036–0.043%, but that's only available to federal employees and military.
But here's the part most people miss about 401(k) providers.
Here's where it gets complicated: having Vanguard funds in your plan doesn't guarantee low costs. A common complaint on forums like r/Bogleheads is that employer plan switches can dramatically change costs — for example, Vanguard index funds priced at 0.01% in one plan might be offered in a retail share class at 0.54% in another. The provider matters, but so do the share classes your employer selected.
A June 2025 Abernathy-Daley analysis of 58,300 corporate 401(k) plans found that more than 99% contained at least one fund with a cheaper, higher-performing alternative over 3-, 5-, and 10-year periods. That doesn't mean your specific funds are bad — it means the odds are high that at least one cheaper alternative exists. It's also worth noting that many plans include actively managed funds that deliver value through strategies index funds can't replicate — such as sector rotation, downside protection, or access to asset classes unavailable in passive vehicles. The goal is to evaluate each fund on cost and performance, not to assume that higher cost always means lower value.
About 20–23% of plans offer a self-directed brokerage window, but only about 1% of participant assets flow through them — primarily used by higher-balance, more sophisticated investors. If your plan offers one, it's worth investigating as a way to access lower-cost funds.
The legal environment is adding pressure. 155 ERISA fiduciary lawsuits were filed in 2025, and more than 600 excessive fee lawsuits have been filed over the past decade. In Cunningham v. Cornell University (April 2025), the U.S. Supreme Court unanimously lowered the bar for these lawsuits — meaning more will survive early dismissal. These were notable enforcement actions — not the norm — and they primarily target plan sponsors and recordkeepers, not individual financial advisors. But they illustrate why checking your own plan documents is a reasonable step.
Nearly 80% of companies with 100+ employees are paying above efficient pricing on administrative fees according to Abernathy-Daley. That's not necessarily a sign of negligence — administrative pricing has changed rapidly, and many plan sponsors simply haven't renegotiated recently. Plan sponsors face real consequences for fee oversight failures, which means the conversation about fees is one your HR department is likely already having — or would welcome help starting.
What to do if your 401(k) fees don't match the value
The good news: you have more control than you think.
Let's be real — you can't pick your 401(k) provider the way you pick a bank. But you have more options than you might think. The goal isn't to distrust your employer or your plan — it's to trust, then verify.
Strategy 1: Switch to the lowest-cost index funds in your plan lineup. Most plans offer at least one S&P 500 index fund or total market fund with a low expense ratio. If your target-date fund charges 0.80% and a comparable index fund charges 0.05%, that's a difference worth evaluating for its long-term impact. Keep in mind that target-date funds provide automatic rebalancing and age-appropriate asset allocation — services that have real value, especially if you prefer a hands-off approach. The fee difference is worth evaluating, but so is what you're giving up.
Strategy 2: Talk to HR — constructively, with data. Your employer has a fiduciary duty under ERISA to ensure plan fees are reasonable. Many plan sponsors genuinely want to offer a good plan but may not have the tools or expertise to benchmark their costs. Some participants find it helpful to bring benchmark data — such as your plan's all-in cost estimate and the Abernathy-Daley finding that 80% of mid-to-large companies pay above efficient pricing on admin fees. Frame the conversation as "here's what I found" rather than "you're doing it wrong."
Strategy 3: Use the brokerage window if your plan offers one. About 22% of plans provide a self-directed brokerage option that lets you access funds outside the plan's standard lineup — including ultra-low-cost index funds. The fees for the brokerage window itself vary, so check the cost before moving assets.
Strategy 4: Direct above-match dollars strategically. This is the decision tree that matters most:
Contribute enough to get the full employer match. Financial professionals broadly recommend capturing the full match — it's an immediate return that almost always outweighs fee drag.
For plans with all-in costs above ~1.3%, some investors explore directing above-match dollars to a low-cost IRA. The 2026 IRA contribution limit is $7,500 ($8,600 with catch-up for age 50+). A Roth or Traditional IRA at a discount broker can offer expense ratios as low as 0.03%. But be honest about the trade-off: an IRA gives you lower fees but removes the structure and behavioral guardrails that help many investors stay on track. If you tend to raid non-retirement accounts or skip contributions without payroll deduction, the 401(k)'s built-in discipline may be worth the extra cost.
After maxing the IRA, return to the 401(k) up to the $24,500 limit (2026; $32,500 with catch-up for 50+; $35,750 with super catch-up for ages 60–63). Even a high-cost 401(k) has tax advantages worth capturing — just know the tradeoff.
If you've maxed both and fees still concern you, a taxable brokerage account with index funds at 0.03–0.05% gives you full control with no plan-level fee layers at all.
If your 401(k) fees are high, it's worth asking whether your financial advisor's fee is also fair — the same logic applies.
Ready to see where you stand?
Start with a free checkup. Connect your 401(k) in 2 minutes — read-only access, never touches your money. Truthifi sees across all your accounts — 401(k), IRA, taxable — in one view, so you can compare fee layers across every institution, not just the one your employer chose. Use the five fee layers framework from this guide as your checklist. See what your portfolio is really doing.
FAQ: 401(k) expense ratios and fees
What is a good 401(k) expense ratio?
A good expense ratio depends on the fund type. For index funds, look for under 0.10%. For target-date funds, under 0.20% is strong and under 0.30% is average. For actively managed funds, under 0.50% is reasonable. The average 401(k) equity fund ER was 0.26% in 2024 according to ICI data. But remember: the expense ratio is only one of at least five fee layers in most plans.
How do I find my 401(k) fees?
Start with your annual fee disclosure (called a 404(a)(5) notice), which your plan must send at least once per year. Then check your quarterly statements for specific dollar amounts deducted. You can also log into your plan's online portal and review fund fact sheets, which list expense ratios. For plan-level fees, request the 408(b)(2) disclosure from your HR department. You can also use a free 401(k) fee calculator — like Truthifi's Fee X-Ray — to see all five layers in one view without entering any personal information.
What is revenue sharing in a 401(k)?
Revenue sharing is when fund companies pay the plan's recordkeeper a portion of their management fees in exchange for including the fund in the plan's lineup. This cost is embedded in the fund's expense ratio and ultimately paid by participants through lower returns. It's one reason plans sometimes include more expensive funds when cheaper alternatives exist. Learn more about how revenue sharing works.
Is a 1% expense ratio too high?
For most fund types, a 1% expense ratio is well above average — index funds average 0.05%, and even actively managed funds average 0.60%. More importantly, if your all-in plan cost (including admin fees and revenue sharing) exceeds 1%, it's worth investigating what services and value you're receiving at that price point. A higher-cost plan that includes strong fund options, employer matching, and access to planning resources may deliver more value than the fee level alone suggests. The better question: does the value of the financial advice and plan services match the cost?
How much do 401(k) fees cost over 30 years?
It depends on the fee level, but the compound impact is substantial — fees eating into your returns grow exponentially over time. See the compound impact table above for specific numbers at each fee level — for example, on a $200,000 portfolio with $10,000 annual contributions at a 7% return, even a 0.50% fee costs over $220,000 more than a 0.10% fee over 30 years. Small fee differences compound dramatically over time.
Are 401(k) fees tax-deductible?
No. 401(k) fees are paid with pre-tax dollars inside the plan — they're deducted from your account balance before taxes are applied. Since you haven't paid tax on those dollars yet, there's no separate deduction available. The fees reduce your balance, which means you'll pay less tax on withdrawals, but that's not the same as a deduction.
Should I max out my 401(k) if fees are high?
Financial professionals broadly recommend contributing at least enough to get the full employer match — that's an immediate return that typically outweighs fee drag. Beyond the match, some investors evaluate: if the plan's all-in cost exceeds 1.00%–1.50%, contributing to a Roth or Traditional IRA (2026 limit: $7,500) before adding more to the 401(k) is a common approach. The 2026 401(k) limit is $24,500 ($32,500 with catch-up for age 50+; $35,750 for ages 60–63). This balances the tax benefits with the fee cost. That said, even a high-fee 401(k) provides tax deferral, creditor protection, and the behavioral benefit of automatic payroll deduction — all of which have measurable value.
How do I lower my 401(k) fees?
Common strategies include: (1) Evaluating whether lower-cost index funds are available in your plan lineup. (2) Discussing plan costs with HR — employers have a legal duty to review plan fees and may not realize costs are high. Benchmark data can help start that conversation. (3) Exploring the brokerage window if available (about 22% of plans offer one) to access cheaper funds. (4) After securing the match, directing additional savings to a low-cost IRA.
What is a 12b-1 fee?
A 12b-1 fee is an annual marketing and distribution charge embedded in a mutual fund's expense ratio, typically 0.25%–0.75%. Named after the SEC rule that permits it. The good news: 12b-1 fees are declining rapidly — 92% of new long-term fund sales in 2024 went to funds without 12b-1 fees. Check your fund's prospectus to see if yours charges one.
What are 401(k) administrative fees?
Administrative fees cover the cost of running the plan — recordkeeping, compliance testing, legal services, and participant communications. They can be flat dollar amounts ($25–$75 per quarter) or asset-based (a percentage of your balance). These are separate from investment expense ratios and are sometimes paid by the employer, sometimes deducted from your account.
Can I complain about my 401(k) fees?
Yes, and your employer has a legal obligation to listen. Under ERISA, plan sponsors have a fiduciary duty to ensure fees are reasonable. Approach HR constructively with benchmark data showing how your plan's costs compare to industry averages. If the employer doesn't respond, you can file a complaint with the DOL's Employee Benefits Security Administration. Context: 155 ERISA fee lawsuits were filed in 2025 alone, though individual participant recoveries remain modest — a median of about $68 per worker according to PLANSPONSOR analysis. The real benefit of litigation is the deterrent effect on plan fiduciaries. Working with HR first is almost always the better path.
What is gross vs. net expense ratio?
The gross expense ratio is the total cost of running the fund before any fee waivers or reimbursements. The net expense ratio is what you actually pay after waivers. Always look at the net ratio — that's your real cost. But waivers can expire, so check your fund's prospectus for the waiver end date and the gross ratio to understand your potential future cost.
The bottom line
Cost is only half the equation. The same math that shows fees compounding against you also shows the value of good financial advice compounding in your favor. Research consistently estimates that quality advice — behavioral coaching, tax planning, rebalancing, retirement income planning, and insurance review — can add 2–3% in net annual value. A plan with slightly higher fees but better fund options and access to planning resources may deliver better long-term outcomes than the cheapest option available. The goal isn't to find the lowest fee — it's to find the best value.
That said, the average 401(k) participant is paying roughly 0.71% all-in — nearly three times what the expense ratio alone suggests. Over a career, that gap compounds into six figures. The information exists in your plan documents. The benchmarks are in the table above. And the math is clear: every tenth of a percent matters. Americans saved a record 7.7% of their paychecks in their 401(k) in 2024 — a total savings rate of 12% including employer contributions. That commitment deserves transparency about where the money goes.
Start by knowing what you're paying — and what you're getting for it. Then decide what to do about it. This guide is about 401(k) fee transparency — and the answer to whether 401(k) fees are worth it depends entirely on the value you receive in return. Bring your fee findings to your next advisor meeting or plan review. When everyone sees clearly, everyone wins.
Read next from the Truthifi blog
Hidden investment fees: the complete guide — Every fee layer across all account types, not just 401(k)s
The true cost of investing — How fees, taxes, and behavioral costs add up across your whole portfolio
How revenue sharing works in your 401(k) — Understanding the fee structures that shape your plan's fund lineup
This article is for educational purposes only and does not constitute financial, tax, or legal advice. It should not be construed as personalized financial advice or a recommendation regarding any financial advisor. Consult a qualified financial professional for guidance specific to your situation. Truthifi is an investment monitoring platform — it does not manage assets, recommend investments, or provide personalized financial advice. All calculations use hypothetical scenarios and historical return assumptions; actual results will vary. Data sourced from ICI, DOL, GAO, Vanguard, Morningstar, Abernathy-Daley, and other institutional sources cited throughout. Updated February 2026.
What is a good expense ratio? Benchmarks by fund type
"Good" depends entirely on what type of fund you're looking at. Here are the benchmarks, based on 2024 data from the ICI and industry research:
Fund type | Good (low-cost) | Average | High (evaluate value) |
|---|---|---|---|
Index equity mutual funds | 0.03–0.10% | 0.05% (asset-weighted) | >0.20% |
Index ETFs | 0.03–0.10% | 0.14% (asset-weighted) | >0.25% |
Actively managed equity | 0.40–0.75% | 0.60% (asset-weighted) | >1.00% |
Target-date funds | 0.10–0.25% | 0.29% (401(k) avg, 2024) | >0.50% |
Bond funds | 0.03–0.10% | 0.10% (index avg) | >0.50% |
Federal TSP | 0.036–0.043% | — | N/A (benchmark) |
A few things worth noting. Target-date fund expense ratios have dropped 57% since 2008 — from 0.67% to 0.29% in 2024. Not all fees are getting worse. Some categories are improving rapidly.
But plan size matters more than most people realize. According to the 401(k) Averages Book (2025), as reported by Kiplinger, a $5 million plan has average total costs of 1.08% (including 0.37% in adviser compensation), while a $50 million plan costs 0.76%.
Morningstar data shows the range stretches from 0.27% for plans above $1 billion to 1.26% for plans under $1 million — only 8% of participants are in the smallest plans, so most readers are in better shape than the worst case. Still, if you work for a smaller company, you're likely paying a "small plan premium" that has nothing to do with the funds themselves.
Truthifi's Score runs 100+ diagnostic checks — including fee analysis most platforms skip — so you can compare your plan against these benchmarks in minutes.
The $469,000 question: how fees and value compound over a career
The difference between a low-cost and a high-cost 401(k) isn't a rounding error. It's a house.
And here's the number that puts it in perspective.
Here's what happens to a $200,000 portfolio with $10,000 in annual contributions over 30 years at a 7% nominal return, depending on the all-in fee level:
Fee level | Annual fee | Year 10 | Year 20 | Year 30 | Cost vs. 0.10% fee |
|---|---|---|---|---|---|
Very low (index) | 0.10% | $527,282 | $1,165,105 | $2,408,121 | Baseline |
Low | 0.25% | $520,878 | $1,137,499 | $2,322,441 | $85,679 |
Below average | 0.50% | $510,372 | $1,092,982 | $2,186,622 | $221,499 |
Average (401(k) equity ER) | 0.67% | $503,346 | $1,063,744 | $2,099,017 | $309,104 |
Median all-in | 0.75% | $500,073 | $1,050,267 | $2,059,068 | $349,052 |
High | 1.00% | $489,977 | $1,009,283 | $1,939,280 | $468,841 |
Very high | 1.25% | $480,082 | $969,961 | $1,826,787 | $581,334 |
Excessive | 1.50% | $470,382 | $932,235 | $1,721,145 | $686,976 |
Even the gap between the "average" expense ratio of 0.26% and the median all-in cost of 0.67% is over $100,000 across a career. The gap between 0.10% and 1.00% — a range that captures most participants — is approximately $469,000. Even on a $50,000 starting balance with $5,000 in annual contributions, the same 1% fee difference compounds to approximately $117,000 over 30 years — real money at every balance level.
Those numbers represent the compound impact of fees — and they're worth understanding clearly. But they're only the cost side of the equation. Research from Vanguard's Advisor's Alpha estimates that good financial advice can add approximately 3% in net returns annually — with behavioral coaching alone worth roughly 1.5%. Russell Investments' value-of-advisor research puts the figure even higher at ~3.54% across rebalancing, coaching, planning, and tax management. A 401(k) plan that costs 0.75% but connects you with quality financial advice and strong fund options may deliver far more value than a bare-bones plan at 0.10%.
Service | Est. annual value | Source |
|---|---|---|
Behavioral coaching (staying the course, avoiding panic selling) | ~1.50% | Vanguard Advisor's Alpha |
Tax-efficient investing and withdrawal strategies | ~0.75% | Vanguard Advisor's Alpha |
Rebalancing and asset allocation | ~0.35% | Vanguard Advisor's Alpha |
Retirement income planning and financial planning | ~0.94% | Russell Investments |
Total estimated advisor value | ~3.00–3.54% | Vanguard / Russell |
The takeaway: a 1% fee costs you 1% — but the right advice can return 3%. The math only works when you look at both sides.
When fees exceed your tax advantage
Here's where it gets interesting: at a certain fee level, the 401(k) tax advantage itself can be reduced to zero. A pre-tax 401(k) with high fees can actually produce worse after-tax outcomes than a low-cost taxable brokerage account.
The breakeven thresholds, based on comparing a 401(k) (pre-tax contribution, taxed at withdrawal) against a taxable brokerage account (after-tax contribution, capital gains treatment at 0.05% fee):
22% tax bracket: ~1.3% all-in fee
24% tax bracket: ~1.3% all-in fee
32% tax bracket: ~1.5% all-in fee
Above these thresholds, above-match dollars may produce better long-term results in a low-cost taxable account. This doesn't mean you should abandon your 401(k) — the employer match is still free money. But it does change the math for your above-match contributions.
How fee drag interacts with the employer match
Even a generous employer match has limits against sustained high fees. With a typical 50% match on 6% of salary ($75,000 salary, $2,250 annual match, 7% return), the match breaks even with fee drag at approximately 1.00% all-in fees over 30 years. A 100% match on 6% extends the breakeven to about 1.50%.
The takeaway: always capture your full employer match — that's an immediate return that almost always outweighs fee drag in the short term. But over a full career, the compound impact of fees on the entire growing balance can exceed the match value. That's why knowing your all-in cost matters.
Truthifi's Dashboard monitors fee changes continuously — so you can track what's happening to your plan costs year over year, not just in a one-time snapshot.
How to find your 401(k) fees: step-by-step
If you've tried to find your fees and felt overwhelmed, you're in good company.
Finding your 401(k) hidden fees shouldn't require a forensic accounting degree — but it sometimes feels that way. If you've struggled to find your fees, you're not alone. A 2021 Government Accountability Office study found that almost 40% of 401(k) participants don't fully understand fee information in disclosures. Even more striking: 45% can't use the disclosure to determine their investment fee, and 41% incorrectly believe they don't pay any 401(k) fees at all. A follow-up GAO report in 2024 confirmed that multiple stakeholder groups still have concerns about whether participants understand these documents.
The Department of Labor estimated the present value of benefits from fee disclosure rules at approximately $14.9 billion over ten years. The intention was good. The execution hasn't reached most participants.
Here's how to find every layer:
Step 1: Find your annual fee disclosure (404(a)(5) notice). Your plan is legally required to send this at least once per year. It lists every investment option in your plan, its expense ratio, and any plan-level fees. Check your email or plan portal — it's often buried in a document labeled "Annual Participant Disclosure" or similar.
Step 2: Review your quarterly statements. Look for line items showing dollar amounts deducted from your account. Administrative fees often appear here as flat charges. If you see "plan fees" or "recordkeeping fees" deducted from your balance, that's your Layer 4.
Step 3: Check individual fund fact sheets. Log into your plan's online portal and pull the fact sheet or prospectus for each fund you're invested in. Look for the expense ratio, 12b-1 fees (often listed under "Distribution Fees"), and any sub-transfer agent fees.
Step 4: Request the 408(b)(2) disclosure from HR. This is the service provider disclosure your plan sponsor receives — it shows what the recordkeeper and other service providers are being paid. Not every HR department will hand this over readily, but you have a right to understand how your plan operates. Approach the conversation constructively: most employers want to offer a good plan but are working within a complex system.
Step 5: Add the layers. Once you have expense ratios (Layer 1), 12b-1 fees (Layer 2), sub-TA fees (Layer 3, if visible), administrative fees (Layer 4), and an estimate of revenue sharing (Layer 5), add them together. Compare the total to the benchmarks in the table above. You can also look up your plan's overall rating on BrightScope (now part of ISS Market Intelligence), which scores 401(k) plans based on costs, participation rates, and investment quality — or use Morningstar to check individual fund expense ratios and performance history.
For a deeper look at hidden fees beyond the expense ratio, see our complete guide to investment fee layers. You can also review Truthifi's glossary of investment terms for definitions of any unfamiliar concepts.
Provider comparison: Fidelity, Vanguard, Empower, Schwab, and more
Not all 401(k) providers charge the same fees — and the range is wider than you might expect.
Vanguard sets the low-cost benchmark with an average expense ratio of 0.06% across all funds as of February 2026, after cutting fees on more than 60% of its funds in 2025–2026 — saving investors approximately $600 million over two years. The Federal Thrift Savings Plan (TSP) is even cheaper at 0.036–0.043%, but that's only available to federal employees and military.
But here's the part most people miss about 401(k) providers.
Here's where it gets complicated: having Vanguard funds in your plan doesn't guarantee low costs. A common complaint on forums like r/Bogleheads is that employer plan switches can dramatically change costs — for example, Vanguard index funds priced at 0.01% in one plan might be offered in a retail share class at 0.54% in another. The provider matters, but so do the share classes your employer selected.
A June 2025 Abernathy-Daley analysis of 58,300 corporate 401(k) plans found that more than 99% contained at least one fund with a cheaper, higher-performing alternative over 3-, 5-, and 10-year periods. That doesn't mean your specific funds are bad — it means the odds are high that at least one cheaper alternative exists. It's also worth noting that many plans include actively managed funds that deliver value through strategies index funds can't replicate — such as sector rotation, downside protection, or access to asset classes unavailable in passive vehicles. The goal is to evaluate each fund on cost and performance, not to assume that higher cost always means lower value.
About 20–23% of plans offer a self-directed brokerage window, but only about 1% of participant assets flow through them — primarily used by higher-balance, more sophisticated investors. If your plan offers one, it's worth investigating as a way to access lower-cost funds.
The legal environment is adding pressure. 155 ERISA fiduciary lawsuits were filed in 2025, and more than 600 excessive fee lawsuits have been filed over the past decade. In Cunningham v. Cornell University (April 2025), the U.S. Supreme Court unanimously lowered the bar for these lawsuits — meaning more will survive early dismissal. These were notable enforcement actions — not the norm — and they primarily target plan sponsors and recordkeepers, not individual financial advisors. But they illustrate why checking your own plan documents is a reasonable step.
Nearly 80% of companies with 100+ employees are paying above efficient pricing on administrative fees according to Abernathy-Daley. That's not necessarily a sign of negligence — administrative pricing has changed rapidly, and many plan sponsors simply haven't renegotiated recently. Plan sponsors face real consequences for fee oversight failures, which means the conversation about fees is one your HR department is likely already having — or would welcome help starting.
What to do if your 401(k) fees don't match the value
The good news: you have more control than you think.
Let's be real — you can't pick your 401(k) provider the way you pick a bank. But you have more options than you might think. The goal isn't to distrust your employer or your plan — it's to trust, then verify.
Strategy 1: Switch to the lowest-cost index funds in your plan lineup. Most plans offer at least one S&P 500 index fund or total market fund with a low expense ratio. If your target-date fund charges 0.80% and a comparable index fund charges 0.05%, that's a difference worth evaluating for its long-term impact. Keep in mind that target-date funds provide automatic rebalancing and age-appropriate asset allocation — services that have real value, especially if you prefer a hands-off approach. The fee difference is worth evaluating, but so is what you're giving up.
Strategy 2: Talk to HR — constructively, with data. Your employer has a fiduciary duty under ERISA to ensure plan fees are reasonable. Many plan sponsors genuinely want to offer a good plan but may not have the tools or expertise to benchmark their costs. Some participants find it helpful to bring benchmark data — such as your plan's all-in cost estimate and the Abernathy-Daley finding that 80% of mid-to-large companies pay above efficient pricing on admin fees. Frame the conversation as "here's what I found" rather than "you're doing it wrong."
Strategy 3: Use the brokerage window if your plan offers one. About 22% of plans provide a self-directed brokerage option that lets you access funds outside the plan's standard lineup — including ultra-low-cost index funds. The fees for the brokerage window itself vary, so check the cost before moving assets.
Strategy 4: Direct above-match dollars strategically. This is the decision tree that matters most:
Contribute enough to get the full employer match. Financial professionals broadly recommend capturing the full match — it's an immediate return that almost always outweighs fee drag.
For plans with all-in costs above ~1.3%, some investors explore directing above-match dollars to a low-cost IRA. The 2026 IRA contribution limit is $7,500 ($8,600 with catch-up for age 50+). A Roth or Traditional IRA at a discount broker can offer expense ratios as low as 0.03%. But be honest about the trade-off: an IRA gives you lower fees but removes the structure and behavioral guardrails that help many investors stay on track. If you tend to raid non-retirement accounts or skip contributions without payroll deduction, the 401(k)'s built-in discipline may be worth the extra cost.
After maxing the IRA, return to the 401(k) up to the $24,500 limit (2026; $32,500 with catch-up for 50+; $35,750 with super catch-up for ages 60–63). Even a high-cost 401(k) has tax advantages worth capturing — just know the tradeoff.
If you've maxed both and fees still concern you, a taxable brokerage account with index funds at 0.03–0.05% gives you full control with no plan-level fee layers at all.
If your 401(k) fees are high, it's worth asking whether your financial advisor's fee is also fair — the same logic applies.
Ready to see where you stand?
Start with a free checkup. Connect your 401(k) in 2 minutes — read-only access, never touches your money. Truthifi sees across all your accounts — 401(k), IRA, taxable — in one view, so you can compare fee layers across every institution, not just the one your employer chose. Use the five fee layers framework from this guide as your checklist. See what your portfolio is really doing.
FAQ: 401(k) expense ratios and fees
What is a good 401(k) expense ratio?
A good expense ratio depends on the fund type. For index funds, look for under 0.10%. For target-date funds, under 0.20% is strong and under 0.30% is average. For actively managed funds, under 0.50% is reasonable. The average 401(k) equity fund ER was 0.26% in 2024 according to ICI data. But remember: the expense ratio is only one of at least five fee layers in most plans.
How do I find my 401(k) fees?
Start with your annual fee disclosure (called a 404(a)(5) notice), which your plan must send at least once per year. Then check your quarterly statements for specific dollar amounts deducted. You can also log into your plan's online portal and review fund fact sheets, which list expense ratios. For plan-level fees, request the 408(b)(2) disclosure from your HR department. You can also use a free 401(k) fee calculator — like Truthifi's Fee X-Ray — to see all five layers in one view without entering any personal information.
What is revenue sharing in a 401(k)?
Revenue sharing is when fund companies pay the plan's recordkeeper a portion of their management fees in exchange for including the fund in the plan's lineup. This cost is embedded in the fund's expense ratio and ultimately paid by participants through lower returns. It's one reason plans sometimes include more expensive funds when cheaper alternatives exist. Learn more about how revenue sharing works.
Is a 1% expense ratio too high?
For most fund types, a 1% expense ratio is well above average — index funds average 0.05%, and even actively managed funds average 0.60%. More importantly, if your all-in plan cost (including admin fees and revenue sharing) exceeds 1%, it's worth investigating what services and value you're receiving at that price point. A higher-cost plan that includes strong fund options, employer matching, and access to planning resources may deliver more value than the fee level alone suggests. The better question: does the value of the financial advice and plan services match the cost?
How much do 401(k) fees cost over 30 years?
It depends on the fee level, but the compound impact is substantial — fees eating into your returns grow exponentially over time. See the compound impact table above for specific numbers at each fee level — for example, on a $200,000 portfolio with $10,000 annual contributions at a 7% return, even a 0.50% fee costs over $220,000 more than a 0.10% fee over 30 years. Small fee differences compound dramatically over time.
Are 401(k) fees tax-deductible?
No. 401(k) fees are paid with pre-tax dollars inside the plan — they're deducted from your account balance before taxes are applied. Since you haven't paid tax on those dollars yet, there's no separate deduction available. The fees reduce your balance, which means you'll pay less tax on withdrawals, but that's not the same as a deduction.
Should I max out my 401(k) if fees are high?
Financial professionals broadly recommend contributing at least enough to get the full employer match — that's an immediate return that typically outweighs fee drag. Beyond the match, some investors evaluate: if the plan's all-in cost exceeds 1.00%–1.50%, contributing to a Roth or Traditional IRA (2026 limit: $7,500) before adding more to the 401(k) is a common approach. The 2026 401(k) limit is $24,500 ($32,500 with catch-up for age 50+; $35,750 for ages 60–63). This balances the tax benefits with the fee cost. That said, even a high-fee 401(k) provides tax deferral, creditor protection, and the behavioral benefit of automatic payroll deduction — all of which have measurable value.
How do I lower my 401(k) fees?
Common strategies include: (1) Evaluating whether lower-cost index funds are available in your plan lineup. (2) Discussing plan costs with HR — employers have a legal duty to review plan fees and may not realize costs are high. Benchmark data can help start that conversation. (3) Exploring the brokerage window if available (about 22% of plans offer one) to access cheaper funds. (4) After securing the match, directing additional savings to a low-cost IRA.
What is a 12b-1 fee?
A 12b-1 fee is an annual marketing and distribution charge embedded in a mutual fund's expense ratio, typically 0.25%–0.75%. Named after the SEC rule that permits it. The good news: 12b-1 fees are declining rapidly — 92% of new long-term fund sales in 2024 went to funds without 12b-1 fees. Check your fund's prospectus to see if yours charges one.
What are 401(k) administrative fees?
Administrative fees cover the cost of running the plan — recordkeeping, compliance testing, legal services, and participant communications. They can be flat dollar amounts ($25–$75 per quarter) or asset-based (a percentage of your balance). These are separate from investment expense ratios and are sometimes paid by the employer, sometimes deducted from your account.
Can I complain about my 401(k) fees?
Yes, and your employer has a legal obligation to listen. Under ERISA, plan sponsors have a fiduciary duty to ensure fees are reasonable. Approach HR constructively with benchmark data showing how your plan's costs compare to industry averages. If the employer doesn't respond, you can file a complaint with the DOL's Employee Benefits Security Administration. Context: 155 ERISA fee lawsuits were filed in 2025 alone, though individual participant recoveries remain modest — a median of about $68 per worker according to PLANSPONSOR analysis. The real benefit of litigation is the deterrent effect on plan fiduciaries. Working with HR first is almost always the better path.
What is gross vs. net expense ratio?
The gross expense ratio is the total cost of running the fund before any fee waivers or reimbursements. The net expense ratio is what you actually pay after waivers. Always look at the net ratio — that's your real cost. But waivers can expire, so check your fund's prospectus for the waiver end date and the gross ratio to understand your potential future cost.
The bottom line
Cost is only half the equation. The same math that shows fees compounding against you also shows the value of good financial advice compounding in your favor. Research consistently estimates that quality advice — behavioral coaching, tax planning, rebalancing, retirement income planning, and insurance review — can add 2–3% in net annual value. A plan with slightly higher fees but better fund options and access to planning resources may deliver better long-term outcomes than the cheapest option available. The goal isn't to find the lowest fee — it's to find the best value.
That said, the average 401(k) participant is paying roughly 0.71% all-in — nearly three times what the expense ratio alone suggests. Over a career, that gap compounds into six figures. The information exists in your plan documents. The benchmarks are in the table above. And the math is clear: every tenth of a percent matters. Americans saved a record 7.7% of their paychecks in their 401(k) in 2024 — a total savings rate of 12% including employer contributions. That commitment deserves transparency about where the money goes.
Start by knowing what you're paying — and what you're getting for it. Then decide what to do about it. This guide is about 401(k) fee transparency — and the answer to whether 401(k) fees are worth it depends entirely on the value you receive in return. Bring your fee findings to your next advisor meeting or plan review. When everyone sees clearly, everyone wins.
Read next from the Truthifi blog
Hidden investment fees: the complete guide — Every fee layer across all account types, not just 401(k)s
The true cost of investing — How fees, taxes, and behavioral costs add up across your whole portfolio
How revenue sharing works in your 401(k) — Understanding the fee structures that shape your plan's fund lineup
This article is for educational purposes only and does not constitute financial, tax, or legal advice. It should not be construed as personalized financial advice or a recommendation regarding any financial advisor. Consult a qualified financial professional for guidance specific to your situation. Truthifi is an investment monitoring platform — it does not manage assets, recommend investments, or provide personalized financial advice. All calculations use hypothetical scenarios and historical return assumptions; actual results will vary. Data sourced from ICI, DOL, GAO, Vanguard, Morningstar, Abernathy-Daley, and other institutional sources cited throughout. Updated February 2026.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always consult with a qualified financial advisor before making investment decisions.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always consult with a qualified financial advisor before making investment decisions.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always consult with a qualified financial advisor before making investment decisions.
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