The Real Cost of a "Set It and Forget It" 401(k)
It's easy to treat your 401(k) like a subscription you signed up for once and never think about again: money goes in every paycheck, it's invested in whatever the plan defaulted you into, and you check the balance once a year if that. For a lot of participants, that's exactly what's happening — and the fees involved rarely feel urgent enough to revisit.
But fees aren't a one-time cost. They're charged every year, on your entire balance, for as long as your money stays invested. That's what makes even a small difference compound into something significant.
A Real-World Example
Independent benchmarking data illustrates just how wide the range can be. For a $1 million plan with 100 participants, total plan costs have ranged from as low as 0.87% to as high as 3.56%, depending on the provider and share class involved.
That's a gap of roughly $400,000 — not from a bad investment choice, but purely from the layer of fees sitting on top of the account the entire time. These figures are illustrative and depend on assumptions about contributions and returns that won't match every situation, but the direction of the effect holds regardless of the exact numbers: fees compound just like returns do, only in the opposite direction.
Worth remembering: A 1% annual fee doesn't sound like much on a single statement. Compounded over a 20–30 year career, it can meaningfully change your retirement timeline.
Why "Set It and Forget It" Often Means "Pay and Never Ask"
Most participants aren't ignoring their 401(k) out of carelessness. The plan is designed to be low-friction: automatic enrollment, a default target-date fund, and a portal that shows a balance without much context. Nothing in that experience prompts you to ask what you're paying or whether it's competitive.
That's especially costly for anyone with a larger balance built up over time. The same 1% fee gap that costs a $20,000 balance a few hundred dollars a year costs a $500,000 balance thousands — every single year, compounding the entire time.
What to Do Instead of Nothing
- Check your fee disclosure annually, not just when you're onboarded. Fee structures and fund lineups change.
- Compare your total cost, not just the fund expense ratio. Recordkeeping and administrative fees add up separately.
- Ask what a 1% difference means for your specific balance and timeline — the dollar impact is very different at $50,000 than at $500,000.
- Get a second opinion periodically, especially after a raise, a new job, or a significant equity compensation event.
The goal isn't necessarily to chase the lowest possible fee. It's to make sure the fee you're paying matches the value you're getting — whether that's low-cost index investing on your own, or a coordinated relationship with an advisor who's actively managing your full financial picture.
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- ¹ 401k Averages Book data, as reported by Kiplinger, "Average 401(k) Fund Fees and Expenses: Are You Overpaying?" (2025). Growth example assumes $10,000 annual contribution over 30 years at an 8% annualized return, before accounting for fees; actual results will vary.