Most 401(k) participants underestimate fees, which can reduce retirement balances by nearly 30% over decades, new data shows.
A survey of 500 401(k) holders revealed 71% cannot identify their plan’s annual fees, while nearly half assume costs are below 0.5%. In reality, only 10% of plans charge fees under 0.4%, leaving many paying more than expected.
The U.S. Department of Labor illustrates the impact: a $25,000 balance with 7% annual returns grows to $227,000 over 35 years at a 0.5% fee. At 1.5%, the balance drops to $163,000—a $64,000 loss from fees alone. Compounding amplifies the effect over time.
Capitalize’s findings highlight the gap between perceived and actual costs, with unnoticed fees eroding long-term savings. The data underscores the need for clearer fee disclosures in retirement plans.