Hidden Fees in Retirement Accounts
Account Maintenance Fees
Explanation
Annual maintenance fees for retirement accounts can range from $$10 to $$100 per year, depending on the provider and account size.
Probability to Save
HighWhy and How
Choose no-fee providers like Fidelity or Charles Schwab. Maintenance fees may also be waived with minimum balances or automatic contributions.
Investment Fund Fees (Expense Ratios)
Explanation
Expense ratios for mutual funds and ETFs can range from 0.05% to 1.5% annually, with actively managed funds charging more.
Probability to Save
HighWhy and How
Opt for low-cost index funds or ETFs, such as those offered by Vanguard and Fidelity, to save on fund management fees.
Brokerage Fees
Explanation
Self-directed accounts may charge $$5 to $$50 per trade, especially for stocks, bonds, or non-ETF mutual funds.
Probability to Save
MediumWhy and How
Use accounts with commission-free trading or automated investment plans to reduce frequent trading costs.
Load Fees (Mutual Fund Sales Fees)
Explanation
Front-end or back-end load fees for mutual funds can be 3% to 5% of the transaction value.
Probability to Save
HighWhy and How
Avoid load fees by choosing no-load funds, which are widely available from providers like Fidelity and Vanguard.
Transaction Fees for Mutual Funds
Explanation
Some platforms charge $$10 to $$50 for buying or selling certain mutual funds outside their preferred list.
Probability to Save
MediumWhy and How
Stick to no-transaction-fee funds offered by providers like Vanguard or Fidelity to reduce costs.
Penalty Fees for Early Withdrawals
Explanation
Withdrawing from a retirement account before age 59½ typically incurs a 10% penalty fee in addition to income taxes.
Probability to Save
LowWhy and How
Avoid early withdrawals unless exceptions apply, such as first-time home purchases or educational expenses.
Rollover Fees
Explanation
Fees for rolling over accounts to another provider can range from $$25 to $$100.
Probability to Save
MediumWhy and How
Research providers offering free rollovers or promotions to cover rollover fees, such as Vanguard or Fidelity.
Asset Under Management (AUM) Fees
Explanation
Managed accounts charge AUM fees of 0.25% to 1.5% annually.
Probability to Save
MediumWhy and How
Self-manage your account or choose robo-advisors with low fees like Betterment or Wealthfront.
Surrender Fees
Explanation
Annuity-based accounts may charge 7% to 10% surrender fees for early withdrawals during the first few years.
Probability to Save
LowWhy and How
Avoid annuity-based accounts unless necessary and review contracts carefully to understand surrender fee terms.
Administrative Fees
Explanation
401(k) plans often charge $$50 to $$150 per year for recordkeeping and management.
Probability to Save
MediumWhy and How
Request a breakdown of fees from your provider and switch to lower-cost investment options if possible.
Termination Fees for 401(k) Plans
Explanation
Cashing out or transferring 401(k) plans may incur $$50 to $$100 termination fees.
Probability to Save
MediumWhy and How
Roll over your 401(k) to an IRA or new employer’s plan to avoid termination fees.
Investment Advisory Fees
Explanation
Financial or robo-advisors charge 0.25% to 1% annually, in addition to fund fees.
Probability to Save
MediumWhy and How
Use low-cost advisory services from platforms like Vanguard or self-manage your portfolio to save on fees.