Average total plan cost and investment fees for 401ks continue to decline, according to the latest edition of the 401k Averages Book.
“All scenarios saw a year over year decrease in total investment costs”
Total investment costs declined between 0.01% and 0.06% from last year, with the average representing a decrease of 0.03%, the book, now in its 22nd printing, finds.
“This decline in investment-related fees paid by participants will help boost retirement savings over the years,” author Joseph Valletta said in a statement.
Small retirement plan (100 participants/$5,000,000 assets) fees declined from 1.20% to 1.19%. Since 2017 small plan total plan costs have dropped 0.06% from 1.25%.
“For years there has been an increased awareness around the impact 401k fees have on long-term savings,” Valletta added. “The trend in lower fees shows that employers and their advisors have been working to reduce the drag caused by these fees.”
Key Findings
- Large 401(k) Plan Fees: Large retirement plan (1,000 participants/$50,000,000 assets) fees declined from 0.90% to 0.88% over the past year and are down from 0.95% in 2017.
- Small 401(k) Plan Fees: Small retirement plan (100 participants/$5,000,000 assets) fees declined from 1.20% to 1.19% over the past year and are down from 1.25% in 2017.
- Investment fees continue to decline: All scenarios saw a year over year decrease in total investment costs ranging between 0.01%-0.06%, with the average representing a decrease of 0.03%.
- Smaller plans pay higher fees than large plans: The small plan with $5,000,000 in assets costs 1.19%, while the plan with $50,000,000 in assets is 0.88%.
- Plans with smaller average account balances pay more than those with larger balances: A $20,000,000 plan with 2,000 participants has an average total plan cost of 1.19%, while a $20,000,000 plan with 200 participants has an average total plan cost of 0.94%.
- Wide range between high and low-cost providers: The range of cost is greatest within the small plan market. The range of a plan with $1,000,000 in assets and 100 participants ($10,000 average account balance) is 0.72% to 2.69%.
MORE INFORMATION ON THE BOOK AND DATA IS FOUND HERE
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.