4 Hidden 401(k) Fees That Are Eating Up Your Earnings

Many savers build their retirement nest eggs through a 401(k). The tax-advantaged retirement savings account comes with many benefits. But if you aren't careful, hidden fees may leach away your portfolio's potential growth.

Take notice of the following hidden fees commonly associated with 401(k) accounts and learn how to eliminate them as you plan for retirement.

Administrative fees include the cost of managing the plan. Such fees are charged as either a percentage of assets or a flat fee per participant.

Generally, a flat fee is preferred to a fee based on the percentage of assets under management. That is especially true if you have a larger balance in your 401(k). But no matter how such fees are structured, any administrative fee attached to your 401(k) can eat into your savings.

Unfortunately, administrative fees are largely out of your control. The best you can do is lobby your company to choose a better plan that charges fewer fees.

If your company is unwilling to make a switch, you could opt to put more of your retirement money into an IRA of your choice instead of into your company's 401(k). That can help you avoid the administrative fees.

However, if your company offers to match any portion of your contributions, it's likely a good idea to take advantage of that opportunity before redirecting remaining funds to an IRA.

Investment fees include costs associated with the mutual funds or ETFs that are within your 401(k). Although these fees can appear small, the reality is that they can add up quickly.

In order to avoid them, look at the expense ratios of the funds within your investment portfolio. The lower the expense ratio, the better.

Generally, a reasonable expense ratio for an actively managed portfolio ranges from 0.50% to 0.75%. But you'll find much lower expense ratios through index funds and some target date funds, with many options below 0.10%.

If you discover that your investment fees are higher than you would like, think about switching up your investments.

When you take specific actions within your 401(k) account, you might face an individual service fee. For example, you might have to pay an individual service fee when taking out a loan from your 401(k) plan.

In order to avoid individual service fees, read through the fine print of your 401(k) plan. With a clear understanding of your 401(k) fees, you'll know when they apply and can choose to avoid actions that would lead to a fee.

For instance, just refraining from withdrawing from a 401(k) can help you avoid incurring an individual service fee.

The 12b-1 fee is often overlooked. It covers things like advertising and marketing costs. In some cases, these fees can be used to pay commissions to brokers and salespeople of particular mutual funds.

Whenever possible, avoid investing in a fund that includes a large 12b-1 fee. Unfortunately, these fees are common and can take a big bite out of your nest egg.

Now that you have a little bit more knowledge about the fees lurking in your 401(k) plan, it's time to take action. Here are some steps you can take to uncover the fees in your plan:

• Read the fine print. Any fees attached to your 401(k) should b clearly stated in the documents associated with your 401(k) plan.
• Review your statements. Read through any account statements you receive to track down potential fees.
• Use an online tool. Some online tools allow you to analyze your retirement portfolio to highlight any fees involved.
• Ask for help. Working with a financial advisor to review your 401(k) can help you get clarity on the fees within your plan.

As you save for retirement, your 401(k) is likely to include a significant portion of your nest egg. With so much riding on your savings, it's a good idea to get familiar with any fees attached to your investment portfolio.

Comb through your account to uncover hidden fees. When you find a fee, take action if possible to avoid overpaying going forward.