Expense Ratio (funds, charge, employee, payroll)

[goodlife36]

Initially my employer did not offer a 401k so I opened up an IRA. My employer has since decided to offer a 401K without a match. The expense ratio is .92. The expense ratio with my current IRA is .16. What a difference. I am going to keep what I have. Why is it so high?

[mathjak107]

depends who they use . some 401k's have funds that are institutional class and lower than you can get on your own .

i was on the 401k committee at work . until we had enough money in the plan we were forced to go with places at the time like meryl lynch . their fees were higher .

after we had enough we went to fidelity .

fees were just a tad higher than the same funds outside the 401k because of the extra expense of fidelity administering the 401k . if our plan was bigger we could have gotten the institutional shares which were even cheaper

[rjm1cc]

Their are costs linked to a 401k. I am guessing that part of the fee is rebated back from the fund company to the local people who are running the 401k (not company employees).

Your employer is probably picking up other costs that are not being charged to you. These would be the payroll related processing costs and probably an annual audit.

It is possible that the annual audit could be included in the expense ratio.

Since you do not have a match I would agree with your to stay with your IRA. I would also think about using a ROTH IRA.