The Simple Mistake That Could Sabotage Your 401(k) in 2026

My husband and I have experienced a few significant changes recently. Not only has he decided to semi-retire and start a consulting business, but he’s also taken over some of the financial tasks I’ve previously handled.

A couple of weeks ago, he decided he would transfer the money from his employer-sponsored 401(k) plan to an IRA. His former employer offered a 6% matching plan on his contributions, a deal too good to pass up. However, it may have been a mistake to max out that 401(k) account because plan fees were higher than expected. I only tell you this because there’s a lesson in it.

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A lesson that stings (quite) a bit

Years ago, when my husband went to work for his employer, he thought I combed through the paperwork to find fees because I’m the household money geek. I thought he took care of the task because the account was in his name. Yes, we were busy moving from another state, but we both should have sat down and determined if the fees were fair. It was a ridiculous mix-up.

If you haven’t already, I recommend checking the fees on all your investment accounts, both private and employer-sponsored. Every dollar you pay in fees is a dollar that can’t grow over time or benefit you in retirement.

What high fees do to your savings

Let’s say you’re under 50 and contribute $24,500 annually to your 401(k), maxing out the account. If you’re paying 1.5% in total annual fees, that means you’re losing $367.50 each year. But what’s worse is that you’re also losing out on any gains you may have earned on that money.

Most investment accounts have fees that cover everything from account maintenance to trading commissions. But let’s imagine the fee is 0.5% instead of 1.5%. If that were the case, you’d pay $122.50 annually instead of $367.50. That’s a savings of $245, money that could have remained in your account.

If that $245 were in your account each year, earning an average return of 7%, it would be worth $15,499 in 25 years (even more with company matching). That’s not a fortune, but it’s sure enough to help cover healthcare costs in retirement or take a nice trip somewhere you’ve always wanted to visit.

How much should you pay?

Fees of 1% to 1.5% signal high costs, although the average fee on retirement accounts ranges from 0.5% to more than 2%. To prevent fees from shrinking your nest egg, aim to pay 0.5% or less.

If you’re investing for retirement on your own, it’s easy enough to shop around for a brokerage with low fees. However, it may be a little trickier if you’re investing through an employer-sponsored plan. It doesn’t have to be.

Whether it’s with your employer or plan provider, you have the right to negotiate high 401(k) fees. Ask about ways to lower the expense. They may be able to direct you toward funds with lower costs.

If you can’t get anywhere with your employer or plan provider, you have the option of contributing only the amount the company matches to its 401(k) and also contributing to an outside account with lower fees. For example, an individual retirement account (IRA) generally offers lower investment fees and more low-cost fund options.

Don’t make the same mistake we did. Be sure to read through the fine print to learn how much you’re paying, and don’t assume that a spouse or partner took care of the task.