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Your Take: How Much Do You Pay Your 401(k)?

Posted By Jim On 04/06/2012 @ 7:12 am In Personal Finance | 12 Comments

The latest issue of Smart Money magazine has a big feature on 401(k) plans, from their origins to their offerings, and it’s a good look at how plans vary. You might get more options with a smaller 401(k) administrator but you pay higher in fees. You could reduce the number of options but employees pay less. It’s the classic choice vs. cost I suppose, though I’m not entirely sure why it’s more expensive to offer more choices with low cost mutual fund providers like Fidelity and Vanguard (often cited as the administrators with the lowest costs but employers tend to choose fewer options).

Here’s a question for you – how much do you pay for your 401(k)?

Since leaving my two prior jobs, I rolled over my 401(k) to Vanguard into rollover IRAs and it’s distributed between the Vanguard 500 Index Fund (VFIAX [3]) and a Vanguard Emerging Markets Stock Index Fund (VEMAX [4]). The Vanguard 500 Index has an expense ratio of 0.06% while the Emerging Markets fund has an expense ratio of 0.20%. At Vanguard, there is a $20 annual fee per fund if you opt for a paper statement but I didn’t so that fee is waived (it’s also waived if you have over $10,000 in an account). As a weighted average, I’m paying 0.12% ($11.93 on $10,000) for my 401(k). I don’t think I could get any cheaper and, in my case, I have the choice of any and every Vanguard fund.

Cost and choice was a significant driver in my decision to roll over my 401(k), followed by simplicity (I like managing everything from Vanguard, rather than multiple brokerage accounts).


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[3] VFIAX: https://personal.vanguard.com/us/funds/snapshot?FundId=0540&FundIntExt=INT

[4] VEMAX: https://personal.vanguard.com/us/funds/snapshot?FundId=5533&FundIntExt=INT

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