What Fee Level Does Clark Consider Acceptable For a Company 401(k)?

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It’s easy to find information about investing fees with the best investment companies.

If you’d rather not wade through the websites of Fidelity, Schwab and Vanguard, you can conduct a simple Google search.

Trying to discern the fee structure for your company 401(k) account? That’s where things get trickier. And once you find the administrative and investing costs, how do you know whether it’s acceptable?

That’s what a listener of the Clark Howard Podcast recently asked.

What Fee Percentage Is Too High for Your Workplace 401(k) Account?

Are my workplace 401(k) fees too expensive? A listener wanted to know that on the Feb. 23 podcast episode.

Lynn in California asked: “I’ve learned from Clark how important it is to beware of fees with investing. But what is considered a high fee for a 401(k)? My work uses Principal: ‘For the current year, an annual Plan administrative expense of 1.68% applies to your account balance.'”

“Is that considered to be a high fee? I currently invest only up to the company match.”

As you can see and hear in the video clip at the top of this article, Clark had a tough time containing his emotions after hearing about the monster fee.

For context, Fidelity Zero funds offer fee-free investing. Vanguard’s average ETF charges investors 0.06% annually. Even fee-only fiduciary financial advisors charge about 1%. And they offer a much larger breadth of personal services.

Lynn is getting charged nearly 1.7% before taking investing fees into account. That sort of fee structure could cost her tens of thousands of dollars over the course of her investing lifetime.

“Say what? A 1.68% administrative fee?!” Clark says. “Your employer obviously has their heart in the right place that they’re offering a company match. But they don’t have any idea how to pick a 401(k).

“That is beyond unbelievably high and obviously is an insurance company-provided 401(k).”

What Amount in 401(k) Fees Is Good (or at Least Fair)?

That begs the question. What is an appropriate cost for a company 401(k), including administrative fees and investing costs?

You can feel good about how much you’re getting charged if the combined annual fee is below 0.5%, Clark says. And if you work for a tiny company that still happens to offer a 401(k) plan with a match, he’s willing to concede up to 0.75%.


“So this is more than double that just for the administrative costs before you even consider the costs of the investment expenses for each investment,” Clark says. “That plan is a disaster. Plain and simple.”

Should Lynn Continue Investing Despite the 401(k) Fees She Faces?

So we know that 1.68% before even accounting for the investing fees is jaw-droppingly expensive. It’s even fair to consider that number a rip-off.

But Lynn works for that company. If she wants to contribute to a 401(k) at work, that’s her option.

She’s currently contributing enough to earn the company match, which Clark advises even despite the massive plan fees. Beyond that, Clark thinks that Lynn shouldn’t contribute even an additional dollar.

If the 401(k) company match equals 50% of your contributions up to 6% of your salary, contribute 6% of your salary. A match is the same as getting a raise. It’s free money.

After that, focus on maxing out your Roth IRA, assuming you’re income-eligible. Then consider investing with a low-cost taxable account at a place such as Fidelity (with the Zero funds), Vanguard or Schwab.

“I don’t know where you are in the hierarchy of the organization or if it would be appreciated if you were to offer the information that the expenses are way too high in the plan,” Clark says. “That’s up to you if you think that’s something you could say.

“Otherwise do exactly what you’re doing. Put in the amount of money you’ve got to put in to pick up the employer match.”

Final Thoughts

I’d venture to guess the large majority of people have no idea what they pay in annual fees to invest through their workplace 401(k) plan.

If you’re in that camp, it’s a good idea for you to find out.


Assuming your company-provided plan doesn’t gouge you, you may not need to change anything about your investment strategy. But if you’re getting hammered with excess fees, you may consider contributing only up to the company match.