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What Happens to 401(k) Fees After You Leave Your Job
If you’ve changed jobs a few times, you may have an old 401(k) sitting somewhere. Nearly $1.65 trillion is held in abandoned retirement accounts across roughly 30 million workers. Left untouched, these accounts can quietly become expensive and eat into your balance and limit your flexibility.
When you’re actively employed, your company often covers some or all fees associated with 401(k) plans. Once you leave, that support usually goes away.
Here are some common fees people don’t realize they’re paying:
- Plan administration fees: Costs for running the plan, like recordkeeping and customer support, which may be charged directly to your account.
- Investment fees: Ongoing fees built into your funds, such as expense ratios, that could potentially reduce your returns over time.
- Individual service fees: Charges for optional features, like taking a loan or requesting certain transactions.
- Former employee fees: Account maintenance fees that may apply only after you leave your employer.
When you leave your employer, these fees may seem small at first. Over time, they can add up and impact your long-term retirement outcomes, often without you noticing since they’re deducted automatically.
Why Fees Matter More Than You Expect
Small annual costs may go unnoticed but over time, fees reduce the amount of money that stays invested and potentially growing.
That doesn’t mean every 401(k) is “bad” or that an IRA is always cheaper. It simply means fees deserve attention, especially when the account is no longer tied to your current employer.
Reviewing old accounts periodically is one of the most practical (and overlooked) retirement hygiene habits.
Your 4 Options for Old 401(k)s
If you have an old 401(k), you generally have four choices:
- Roll over to an IRA: Combining old 401(k)s into one IRA can give you a clearer view of your total savings, reduce the number of statements to manage, and help minimize unnecessary fees, giving you more control over your investments.
- Move to a new employer’s plan: If your new employer allows it, you can transfer your old 401(k) into your new 401(k) plan, keeping all your workplace retirement savings together.
- Leave it where it is: Some people choose to keep their accounts with the original provider. This can be simple, but you’ll likely need to track multiple accounts and fees.
- Cash out: Taking money out of your retirement accounts is generally the least favorable option due to taxes and potential penalties.
Carefully reviewing your options can help you make the best choice for your retirement. For many people, rolling over into an IRA can be an effective way to manage fees long-term and stay in control.
