Here’s how to reduce the hidden fees that could be eating away at your retirement plan’s bottom line.

Most participants in retirement plans are blissfully unaware of all the expenses they’re paying. Brokerages, record keepers, research providers, money managers, and law firms are some of the many providers that play a role in running a plan. And they don’t work for free.

Finding a way to pay lower fees can substantially increase your retirement assets over time. By reducing annual fees and expenses to 0.5% from 1.5%, a 30-year old with $25,000 in assets could expect an extra $64,000 at retirement, according to a Department of Labor estimate.

Three Kinds of Fees

In general, there are three categories of retirement plan expenses.

• The costs of operating the plan: These costs pay for accountants, record keepers, customer service agents, and other providers who keep the plan running day to day.
• Investment fees: Individual investment choices such as mutual funds charge their own expenses. These may include the fees a fund pays a manager to select stocks, or loads, that are charged when funds are bought or sold. Variable annuities, a kind of insurance contract, may impose surrender fees and other charges that you should watch closely.
• Charges for specific services: Plan participants may be charged for borrowing money from their 401(k) account, for instance.

Who Pays the Fees?

Investment management fees are always borne by the plan participant, since the expenses are deducted directly from the investment’s total return. The stocks in the mutual fund you own may have gone up 10%, but a 1% expense ratio would reduce that return to 9%.

It can be trickier to determine who pays the plan administration fees. Sometimes these costs will be deducted from the investment returns of the individual investment choices, or they may be charged to each participant as a flat fee or in proportion to the size of the invested assets.

Where Do I Find How Much I’m Paying in Fees?

A description of the fees charged by a retirement plan can be found in the packet provided to employees when they first enroll. This document, called a summary plan description, should outline the sales charges and ongoing operating expenses for each of the individual fees. The plan description may also describe how the plan’s administrative expenses are imposed. More information on the plan itself can be found in its annual report, which is known as a Form 5500. The fund’s customer service staff should be able to provide a copy of the report for your inspection.

Keeping Fees Low

Simple steps can make a difference in keeping fees to a minimum.

• Consider investments that track an index, such as the Standard & Poor’s 500. So-called index funds save money that would otherwise go to pay someone to actively manage the portfolio.
• Select no-load funds. Funds that charge a load may take out a chunk of assets when the fund is purchased or sold. No-load funds avoid these fees.
• Watch your trades. Many funds charge high fees to active traders in order to discourage speculators. Buy-and-hold is generally a smart strategy.

For More Information

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LifeWire, a part of The New York Times Company, provides original and syndicated online lifestyle content. Daniel Sorid is a financial journalist in New York City.