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Opinion
Ethan Schwartz

401(k) Fees Are Eating Your Retirement Savings

Reform could put billions into the pockets of American savers.

Could have had a nicer hot tub without the 401(k) fees.

Could have had a nicer hot tub without the 401(k) fees.

Photographer: Ralph Orlowski/Getty Images

Half of Americans aren’t saving enough for retirement. Blame for this problem is usually pinned on some combination of low wages or irresponsible choices, but there’s another culprit: an expensive and antiquated 401(k) system. Reforming it could put billions more dollars into savers’ pockets.

Our current system favors costly middlemen in ways that were perhaps necessary when 401(k)s were first established 40 years ago, but are largely superfluous today. Consider that by various estimates, the average fees levied on 401(k) savings hover in the range of 0.5% annually, with much higher costs for small employers. That compares to annual expenses well under 0.1%, and often near zero, offered by widely available stock and bond index funds and ETFs in many flavors and stripes outside of 401(k)s.