What Will a 401(k) Cost?

Answering this important question hasn't always been easy. Complex and hidden fees of investments can make actual costs difficult to calculate. And then there are providers that prefer larger business clients.

Costs Matter

But there's good news: a few companies have designed low-cost solutions for any size business and value helping a company start their first plan.

To make sure that you get the right-priced 401(k) for your business, this page provides straightforward education on price structures and how to uncover hidden fees that we believe are all too common in the industry. Whether you're a sole proprietor or owner of a business with a hundred or more employees, you deserve a fair-priced 401(k) plan that provides complete disclosure on exactly what you're paying.

401(k) Business Costs

Like healthcare or any benefit program, 401(k) services come with a cost to your business for administration, product and education services, etc. But where healthcare costs can run between $6,459 (for single coverage) to $18,602 (for family coverage) per employee per year,1 a 401(k) plan cost is only a fraction of that amount.

The costs that often are overlooked or brushed over by a provider but is really the most important when it comes to how much you may have for retirement, are investment expenses.

First, let’s cover employer paid (aka administrative or recordkeeping) costs and then discuss investment costs each participant bears.

Keep Your Administrative Costs Low

401(k) charges typically include a one-time price to establish your plan and an ongoing annual or monthly charge for administration services. These costs cover recordkeeping, personal support from an account manager, compliance support, and product and service improvements.

The per-employee administration cost of a 401(k) varies dramatically across the industry. Many 401(k) providers concentrate on serving large businesses and are neither priced nor pursuing to serve sole proprietors or businesses with fewer than 50 employees. To ensure you have perspective on a fair price for those starting their first plan, the chart below provides a general benchmark to shoot for:

A business with… Can expect to pay the below in administration:
One Employee (self-employed)

$250 per year / decreasing as your monies grow

(for a fully administered solo 401(k) plan)

2-10 Employees

$1,250 per year / decreasing as your monies grow

(generally, tax deductible plus tax credits can apply)

11-25 Employees

$1,750 per year / decreasing as your monies grow

(generally, tax deductible plus tax credits can apply)

26-50 Employees

$2,600 per year / decreasing as your monies grow

(generally, tax deductible plus tax credits can apply)

51-100 Employees

$3,800 per year / decreasing as your monies grow

(generally, tax deductible plus tax credits can apply)

If your company has more employees, costs will be a bit more based on the costs to support them. However, regardless of your employee size, if your company has a 401(k) plan and the program has grown to over $500K or $1M in total assets, you can expect to pay at least 25% less across the board.

Know that some providers may charge participants directly for the administration to lessen the cost to the employer (e.g. $3/month per participant). That can add up and impacts the ability to grow investments for employees and the owner's own personal 401(k) account.

ShareBuilder 401k is different. We are dedicated to meeting the needs of any size business, including small businesses. We have worked to take the cost out of 401(k)s so any size business can afford a plan. Compare the core ongoing cost of a ShareBuilder 401k for a less than 10-person company to typical industry pricing for a plan just getting going:

First-Year Core 401(k) Cost Comparison2

ShareBuilder 401k Industry Average Pricing Savings with ShareBuilder 401k
Administration Costs $1,140 $1,730 34%
Fund/Investment Expenses 0.83% 1.79% 54%

Watch out for surprise fees

Some providers "nickel and dime" businesses with fees for common services like preparing tax forms, rolling over funds from a previous 401(k) plan provider, and more.

  • Tick

    Determine whether you will be charged by the number of employees at your company or the number of participants in your 401(k) plan (participants is preferable).

  • Tick

    You'll want to avoid paying excessive or additional charges for expected services like IRS form preparation, discrimination testing, or the transferring of assets from another 401(k) plan.

  • Tick

    Make sure you receive a fee schedule or quote that shows every fee your company could possibly be charged.


Learn more about the total cost of ownership and the questions you may want to ask any provider you are considering.

Investment Expenses – Pay No More Than 1% All-in!

The sad truth is that many 401(k) providers offer funds that have high expense ratios and charge additional, often hidden fees that can have a big impact on your and your employees' retirement savings.

Low Expenses Can Save a Lot

We strongly believe that for long-term investing, keeping total participant fees less than 1% makes the most sense. Paying even 1% more in expenses can cost you hundreds of thousands of dollars in retirement savings over a 40-year career. Every dollar you and your employees spend in expenses is one less dollar invested in the markets for tomorrow.

Fund expenses (which can include 12b-1 charges), investment management, recordkeeping and custodial services often comprise the investment expenses. Sum these up if you are comparing providers. For example, ShareBuilder 401k investment expenses are less than 1% on average and lower as your plan grows in asset value past defined milestones that include amount of assets and number of employees. If assets dip below a milestone expenses could increase.

Paying 1% less can make a big difference!

This example shows the effect that expenses can have on your 401(k) retirement account over a career of 40 years by comparing the costs of paying 1% versus 2% on investments and how savings may accumulate. It assumes the investments have a fixed annual 7% return before expenses with no distribution or tax considerations and does not imply future returns. The example assumes each employee has a salary of $75,000 in year one and receives a 3% merit raise each year on-going. In addition, the employee contributes 5% of her salary each year and receives a 3% of salary company matching contribution.

Some 401(k) providers may claim that they charge no asset management or investment management charge or boast of low expense-ratio investments, or even that they will refund a portion of 12(b)-1 fees. Just be sure you know the sum total of all investments including fund expense ratios, if there are loads or excessive charges that can make these claims irrelevant and what services they may not be providing that you need. The total cost applied against your contributions is what matters most!

Get a Fair Price on a 401(k) Plan

Here are three ways you can make sure your 401(k) provider is controlling costs and minimizing the expenses paid by employees out of their retirement savings:

Step 1

Things to Think About When Comparing 401(k) Costs

Keep all-in investment expenses under 1%.

This includes the fund expense ratios as well as the three big drivers. Whether you’re just starting a plan or have a plan with $10 million in assets, it is more than doable to keep costs under 1%. We believe this is essential for long-term success.

Limit your investment options to low-expense funds.

What percentage of your investment roster is made up of index funds vs. actively managed funds? Index funds typically have lower expenses than actively managed funds. If the majority of funds in your investment roster are actively managed investments, think about how the expenses stack up and whether the fund performance of these over 5 and 10-years align line with their benchmarks and comparable index funds.

How does your 401(k) provider(s) earn money on your plan?

We believe the most straightforward and fair approach is to apply a flat investment management expense across the plan to manage ERISA 3(38) services, plan consultation, employee education, and in some cases recordkeeping and custodial services. Warning: don’t be surprised to find that marketing expenses (12b-1s and revenue sharing), share class, and wraps vary by fund with your current provider. Why? How is that fair? These other fees and expenses can unknowingly penalize an employee for picking one fund over another. Also, are you getting the services you want, desire or need to run a great plan at a reasonable price? Does the service really vary by fund?

How does your 401(k) provider keep costs in check?

We automatically lower expenses as your plan grows past identified milestones to ensure pricing remains low for employees. Note: expenses can increase if assets drop and/or participation grows substantially.

Step 2

Other Costs: Setup and Conversion Charges

Some plans may assess one-time setup and/or plan conversion costs, although there are providers who don’t charge for plan conversions and waive plan setup if the total assets exceed a certain amount.

Step 3

We Can Help You Compare Plans

If you want some guidance in determining whether your plan makes the most financial sense for you and your employees, we can help by reviewing your costs and even forecasting the impact.

1 2018 Annual Employer Health Benefits Survey, Kaiser Family Foundation and Health Research Education Trust.

2 ShareBuilder 401k plan expenses range from 23% to 68% less than the industry average at various data points from a $50K plan with 6 participants to a $100M plan with 2,000 participants based on 401k Averages Book 2023 Data and Custom Benchmarking report prepared for ShareBuilder Advisors. This comparison compares the average cost of a 6 participant, $50,000 plan’s industry average costs for administration and investments versus those of a ShareBuilder 401k Safe Harbor plan’s annual administration price and its average investment expenses. It does not include unique employee-initiated transactions such as loans, distributions or employer transactions such as plan amendments.