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How Much Do 401(k) Participants Know About Their Plan Fees?

New survey results from TD Ameritrade suggest that three-quarters of Americans are in the dark when it comes to 401(k) fees.

The survey of more than 1,000 investors finds that the vast majority of people either erroneously believe they do not pay any 401(k) fees (37%), are unaware whether their plan has fees (22%), or do not know how to determine the fees (14%). Just 27% of respondents said they know how much they are paying in fees.

The survey results also quantify what participants do with their 401(k) accounts after they separate from employment:

  • 34% roll it into an IRA;

  • 31% roll it into a new employer’s plan;

  • 22% keep the account with their former employer; and

  • 13% cash out their accounts.

When deciding between either staying in a former employer’s plan or a rolling the account into a new employer’s plan or an IRA, TD Ameritrade advises that it’s important for participants to consider the various fees and investment options and fully understand the implications. “The common belief is that all 401(k) funds have institutional pricing that’s cheaper than those available to individual investors, which is not always the case,” the firm says.

To help participants analyze and gain insight into their 401(k), 403(b) or other DC plans, TD Ameritrade has teamed with fintech firm FeeX to launch a free fee analyzer tool. The tool analyzes administrative fees, as well as individual fees for the mutual funds within the plan, providing users with a detailed view of their specific investment holdings and plan service fees. Users can also see a side-by-side comparison of the fees associated with their 401(k) account(s) versus other potential fees in an IRA.

The Investor Pulse online survey was conducted with 1,005 American adult investors by True North Market Insights, between March 31 and April 3, 2017.