Retirement savers are getting a boost from low mutual fund fees

Key Points

  • Historic Lows in Fees: Average equity mutual fund expense ratios in 401(k) plans have decreased significantly from 0.76% in 2000 to 0.26% in 2024, as per the Investment Company Institute (ICI) report.**
  • Impact of Fees on Savings: A mere 0.5% difference in fees over 35 years can reduce a retirement account balance by over $37,000, demonstrating the long-term impact of lower fees.**
  • Target-Date Funds Also Cheaper: Expense ratios for target-date funds, popular among retirement savers, have dropped from 0.67% in 2008 to 0.29% currently.**
  • Fee Transparency Challenges: While fees are often hidden, employers must provide fee disclosure notices, and resources like FINRA’s fund analyzer can help uncover costs.**
  • Advice for Savers: Opting for low-cost index funds or options with expense ratios below 0.5% can help maintain the trend of reduced fees.**

Summary

A recent Investment Company Institute (ICI) report brings good news for retirement savers: the average expense ratios for equity mutual funds in 401(k) plans have hit historic lows, dropping from 0.76% in 2000 to 0.26% in 2024. This reduction, though seemingly small, has a significant impact over time; for a $25,000 balance growing at 7% over 35 years, a 0.5% higher fee could cost over $37,000 in retirement savings. Target-date funds, a favored retirement vehicle, also saw fees decline from 0.67% in 2008 to 0.29% now. ICI’s Sarah Holden emphasized that this decades-long trend of declining fees benefits investors planning for their financial future. However, uncovering these fees can be tricky, though employers must provide disclosure notices, and tools like FINRA’s fund analyzer assist in transparency. The report underscores the importance of low-cost options like index funds to maximize retirement savings, as fees—whether direct or indirect—reduce investment returns and ultimately impact the money available for retirement.

yahoo
July 26, 2025
Stocks
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