Don’t Know Much About … Retirement Plan Fees

About 42 million people are unaware they pay fees on their work place retirement plans, research says.

An estimated $35 billion in fees is being paid by about 42 million people, according to the National Association of Retirement Plan Participants (NARPP)—but they may have no idea they pay anything at all.

The association has released new findings on what retirement plan participants know—and don’t know—about those hidden costs of saving for retirement.

More than half of working Americans (58%) do not realize they pay fees on their work place retirement savings accounts, NARPP says. Its research estimates the amount of fees generated by this group of investors at around $35 billion a year, or roughly $835 per investor. For those participants who do know they pay fees, only one in four (26%) could accurately answer how those fees are calculated. 

It is imperative for investors to understand the fees they pay and the risks associated with high fees, according to Laurie Rowley, co-founder of NARPP. “Investors are essentially acting as their own pension managers, and the consequences of not knowing fee information can have a profound and irreversible impact on a lifetime of savings,” she says.

A strong link between transparent fee information and the level of trust that participants have in their respective service providers also emerged in the study, delivering a clear message to those providers. “If you want to gain the trust and loyalty of your customers, you have to do a better job at providing clear and transparent information on fees,” Rowley says. “Transparency increases trust, and trust is the key to engagement.”

Next: Satisfaction levels seem unchanged, but scores among providers vary.

Investors’ level of satisfaction with their respective service providers’ education programs remains unchanged, at just 38%. However, there is a wide range of scores on education satisfaction when you look at specific providers, which scored anywhere between a high of 51% and a low of just 17%.

NARPP has identified the top five factors investors care about most when evaluating the effectiveness of their service providers’ education programs.

Investors highly value:

  • Information that is always presented in their best interest;
  • Understanding the basics of investing;
  • Fee information presented in a way that is easy to understand;
  • A high level of trust with their service provider; and
  • Assistance meeting their long-term savings goals.

“If we are going to improve outcomes and engagement with retirement savings, service providers need to radically change the way they are communicating with and educating their participants,” says Warren Cormier, chief behavioral officer at NARPP.

New to the study this year was a question asking investors how useful they would find a standardized fee label on all retirement funds, akin to a nutrition label on foods. The results show an overwhelming majority of investors (81%) would find the label helpful. The question was asked in NARPP’s Plan Sponsor Study, and the results show a similar result, with nearly three out of four sponsors agreeing that the label would be helpful to their employees.

Currently, the top performers in education are:

  1. Charles Schwab
  2. Bank of America/Merrill Lynch
  3. Wells Fargo
  4. Vanguard
  5. Fidelity, Empower (tied)
  6. Prudential
  7. John Hancock
  8. T. Rowe Price, TIAA-CREF (tied)

The study was fielded in April by an online panel and includes the responses of 4,368 active participants. Service providers did not submit client lists. All profiled providers have a statistically valid sample. Those providers with too few interviews were not profiled in the study, but their data is included in the averages.

More information on this study can be found by contacting NARPP at