Hidden 401(k) Fees Are Stealing Your Nest Egg

Here's how Wagner gets the 45 cent tally: First, 6 cents goes to commission. Second, 9 cents goes to the effect of the trading on the market -- in other words, as big institutions buy the stock, they can't do it in one fell swoop. The process pushes up the price by 9 cents a share on average. Third, a stunning 21 cents a share goes to delays in trading. "Less than half of what institutions seek to trade gets traded in the first day because their brokers can't get the right terms," Wagner said. Fourth, another 9 cents a share goes to "missed opportunities," the amount of a trade that doesn't get executed because of price appreciation or some other event that causes the manager to cancel the remainder of the order.

"Based on what we've seen, transaction costs are the heaviest burden shouldered by investors over time," Wagner said.

Pricey Share Classes: Soft dollars aren't the only onerous explanation for high investment fees. Among the bevy of mutual fund share classes, "retail funds" often carry hefty expense ratios, loads or sales charges that average about 4%, plus 12b-1 fees and the like.

"Investors need to know the share classes they're getting in their plans," said Sentinel's Lansing. "You might be paying unnecessarily high fees in certain retail share classes."

One of the better developments in 401(k) plans over the past few years has been the increasing use of institutional class fund shares, the dirt-cheap versions of funds offered to institutional clients. According to Cerulli Associates, about 30% of all 401(k) assets are in institutional funds, up from 23% in 1996.

These are the same funds, except fiduciaries make more money from them.

The Fix

According to the 401(k) Provider Directory Averages data, total plan expenses average between 1.07% and 1.4% for plans with 100 to 2,000 participants. Some run as high as 3%, some are less than 0.2%.