A comprehensive audit of 401(k) plan expenses published by the Government Accountability Office found that the average American worker pays between 0.5 and 1.5 percent of their retirement savings in annual fees, costs that compound over a career to represent hundreds of thousands of dollars in lost wealth. Many plan participants have no idea these fees exist because they are deducted automatically rather than billed as explicit charges.
Fee transparency has improved following Department of Labor rules requiring plan sponsors to disclose costs, but researchers find that disclosure documents remain too complex for most participants to interpret and act on. Low-cost index funds have captured a growing share of new retirement contributions, but legacy plans at many small employers still default to higher-cost actively managed options that benefit plan administrators rather than participants.
