401K Fees You Need to Be Mindful Of

Retirement is a scary thing for a lot of people. When you’re no longer earning money on a daily basis, your future could seem bleak. For this reason, it is important to keep on top of your retirement savings to ensure that you will have more than enough money in the bank once you reach such time.

However, even if you religiously stash away money into your 401K, it is still possible that you won’t get as much as you expect you would. This could be due to hidden fees and plan costs, which could eat a huge chunk of your returns. According to a research, there are three in five Americans who are unaware of how much they are actually contributing for their retirement plans.


To ensure that you’re able to monitor your account, here are 401K fees and costs to be mindful of:

Redemption Fee

Also known as back-end load, contingent deferred sales charge or exit fee, a front-end load, a charge taken from an investor’s initial investment, is one of the many sneaky fees you should definitely watch out for. It has such a bad reputation that a lot of investment companies have started to advertise no-load fund options. However, while these firms won’t charge you for loading shares, they can charge you for unloading too soon.

When searching for an investment firm for a retirement account, keep in mind that you need to wait for 65 days on average until you can unload your shares. Anything longer than that is not worth it. It’s also worth knowing that the limit set by SEC for redemption fees is 2%, but some companies may charge as low as 0.01%, which should be your best bet.


Exchange Fee

To lower your investment risk, experts recommend diversification. After all, it is generally better put in your money into at least three different assets so that when one of your investment tanks, you still have other investments to fall back on. But before you transfer from one fund to another, it’s worth checking if there are any exchange fees you might need to pay. Some 401K plans would even charge for additional load and exit fees when exchanging between various funds.

It’s important to know about fees within your retirement plan so you will be able to make informed decisions in the future.

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