Urgent warning about fees which could drain 401(k) retirement accounts
THE FEES…
A recent investigation, published on March 3, 2025, has uncovered how little-known fees attached to 401(k) retirement accounts are silently draining Americans’ savings, potentially costing them thousands of dollars over time. Financial expert Ted Jenkin highlighted that while contribution limits for 401(k)s have increased—rising to $23,500 in 2025, with an additional $7,500 catch-up for those over 50—many savers remain unaware of the impact of hidden charges like expense ratios, administrative fees, and transaction costs. These "predatory" fees, often buried in fine print, can reduce retirement balances significantly, with Jenkin estimating that a 1% annual fee on a $500,000 account could siphon off $5,000 yearly, compounding to a loss of over $200,000 across 30 years due to lost growth. This revelation comes amid growing concern over retirement security as more Americans rely on 401(k)s as their primary nest egg.
These fees vary widely depending on the size and type of 401(k) plan, with smaller companies often bearing higher costs—sometimes exceeding 2% annually—compared to larger firms where fees might drop below 0.5%. Jenkin warns that mutual funds within these plans, particularly actively managed ones, carry expense ratios averaging 0.5% to 1%, far higher than low-cost index funds or ETFs at 0.1% or less. Additional charges, such as $50 annual maintenance fees or trading costs ranging from $5 to $25 per transaction, further erode savings, especially when employers fail to negotiate better terms with plan providers. The lack of transparency is a key issue, as many workers don’t receive clear breakdowns of these costs, leaving them vulnerable to what Jenkin calls “legal pickpocketing” by financial institutions.
(see more below)
In response to this growing problem, the U.S. government introduced regulations in September 2024 to curb "junk fees" in retirement accounts, mandating that financial advisors act in savers’ best interests when rolling over 401(k) funds into IRAs. These rules aim to close loopholes that previously allowed advisors to recommend high-fee products for personal gain, potentially boosting returns by up to 1.2% annually—or 20% over a lifetime, per White House estimates. Jenkin advises workers to scrutinize their 401(k) statements for fee disclosures, opt for low-cost index funds, and leverage employer matches to offset losses. With 544,000 Americans now holding $1 million-plus 401(k)s due to recent stock market gains, the stakes are high, and experts stress that proactive management of these fees could determine whether retirees thrive or merely survive in their later years.