How to audit your 401(k) fees in 20 minutes (fees: the termites of retirement accounts)

By Tom, CPA · Updated October 25, 2026

TL;DR: To audit your 401(k) fees, find your plan's annual participant fee disclosure (required under DOL rule 404a-5) and your quarterly statement. Note each fund's expense ratio and any plan administrative or per-participant fees, then multiply by your balance. A difference of about 1% a year can shrink a long-term balance by roughly 15% over 25 years.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

Termites don't send invoices. They just quietly eat the house while you're busy admiring the paint. 401(k) fees work the same way: a fraction of a percent here, a recordkeeping fee there, and twenty-five years later a big chunk of your retirement has been chewed into sawdust.

The good news is that a fee audit takes about 20 minutes, needs no special software, and federal rules require your plan to give you the data. Grab a coffee, your login, and a calculator. Let's go termite hunting.

CPA Warning Label: Fees are rarely shown as a dollar line item. Most come out of fund returns silently through the expense ratio, so a statement with no visible fee doesn't mean a free plan.

Where fee disclosures hide

Under the Department of Labor's participant fee disclosure regulation (29 CFR 2550.404a-5), plans must give participants:

• An annual disclosure describing plan-wide administrative fees (recordkeeping, legal, accounting) and individual fees (loans, QDROs, brokerage windows), and how they're charged.
• A comparative chart of investment options showing each fund's performance, benchmark, and total annual operating expenses as a percentage and as dollars per $1,000.
• Quarterly statements showing the dollar amount of administrative and individual fees actually charged to your account.

Where to look: the plan website's "Documents," "Plan information," or "Disclosures" section, usually a PDF with a name like "Participant Fee Disclosure" or "Annual Notice." If you can't find it, ask the plan administrator or HR; they're required to provide it.

Expense ratios vs admin fees

The expense ratio is usually the biggest piece, and the only one you control by picking funds. Target-date funds can be cheap or expensive depending on the series; check the chart.

The 20-minute audit

1. Minutes 1–5: download the latest fee disclosure and quarterly statement.
2. Minutes 5–10: list your current holdings, their balances, and each fund's total expense ratio.
3. Minutes 10–13: compute your weighted expense ratio: sum of (balance × expense ratio) ÷ total balance.
4. Minutes 13–15: add plan-level fees from your statement, annualized, as a percentage of your balance.
5. Minutes 15–18: find the lowest-cost broad funds in the lineup (often an S&P 500 index, total bond index, or an index target-date series).
6. Minutes 18–20: compare your total cost with a low-cost portfolio built from those funds, and note the dollar difference.

Calculating the drag

Illustration (assumptions): Larry has $50,000 in his 401(k), adds $10,000 a year, and earns a hypothetical 7% before fees for 25 years.

• Total cost 0.05%: balance about $896,000.
• Total cost 1.00%: balance about $763,000.
• Difference: about $133,000, or roughly 15% of the low-cost outcome.

Even in year one, the gap is visible: 0.95% on $50,000 is $475, roughly a nice dinner out every quarter going to fees instead of compounding. And because fees are charged on the whole balance every year, the dollar drag grows as the account grows. On a $900,000 balance, a 1% fee is $9,000 a year.

Options if fees are high

• Switch funds inside the plan. Most plans have at least one index fund. Moving to it is often the biggest win and costs nothing. Exchanges inside a 401(k) aren't taxable.
• Contribute to the match, then go elsewhere. If the whole lineup is expensive, contribute enough to get the full match, then use an IRA or HSA before adding more to the plan.
• Roll out after you leave. A rollover to a low-cost IRA can cut costs, but check the trade-offs first: Rule of 55 access, creditor protection and the pro-rata rule. See IRA rollovers.
• In-service rollovers. Some plans allow rollovers of certain money while working, often after 59½.
• Give feedback. Plan sponsors are fiduciaries and review their lineups. A polite note asking for low-cost index options is reasonable.
• Skip the managed account if you don't need it. A target-date fund or a simple three-fund mix often costs far less.

Fees that matter for early retirees

If you plan to leave the account in the plan for years after retiring early, for example to use the Rule of 55 or a governmental 457(b) bridge, fees keep running long after the paychecks stop. Some plans also charge a fee for each distribution, which adds up with monthly withdrawals. Ask about per-withdrawal fees and the cost of partial distributions before choosing a withdrawal schedule. A plan that's cheap to hold can be expensive to withdraw from, and vice versa.

Reading the fine print: five red flags

1. Expense ratios above about 0.75% on core funds, especially for large-cap stock funds where low-cost index options are common elsewhere.
2. Share classes with "R1," "R2" or "A" labels when cheaper institutional or "R6" share classes of the same fund exist. The disclosure's comparative chart often reveals this.
3. Asset-based recordkeeping fees that grow with your balance, such as 0.50% a year on the whole account, compared with a flat dollar fee.
4. Stable value or guaranteed accounts with unclear crediting rates. These may not show an expense ratio at all; the cost is built into a lower credited rate.
5. Surrender charges or wrap fees in older annuity-based plans, often seen in some 403(b) or small-business plans.

None of these means the plan is bad overall. A plan with one great index fund and a generous match can still be a terrific deal. The point of the audit is to find what you control and fix that.

Repeat the audit once a year

Fee disclosures arrive annually, lineups change, and balances grow. Put a recurring reminder on your calendar for the month the disclosure usually arrives, rerun the worksheet, and confirm that automatic rebalancing or target-date glide paths haven't drifted you into pricier funds. It's the financial version of checking your smoke detector batteries: boring, quick, and occasionally very important.

Fees on old plans you've forgotten

Old 401(k)s from previous jobs keep charging fees, often with nobody watching. Former employees may pay a higher per-participant fee than current employees, and the balance may sit in a default fund chosen years ago. If you have more than one old account, run the same worksheet on each. Then decide whether to consolidate, which is covered in the consolidation checklist.

A sample audit worksheet

Moving the two active funds to an S&P 500 index at 0.02% and an index target-date series at 0.10% would cut annual fund costs from $780 to about $62, saving more than $700 a year now and far more as the balance grows. That's a 20-minute project paying an hourly rate any consultant would envy.