Reduce Your 401(k) Fees and Improve Your Retirement

(MoneyWatch)  You're probably paying a lot more in 401(k) fees than you realize -- and these high fees could wreak havoc on your plans for retirement. For instance, the Department of Labor estimates that a one percent excess fee on your 401(k) could reduce your retirement plan balance by a whopping 28 percent over your working career.

So how do you find out how much you're paying in fees? The easiest way is to ask your employer. Shoot out an email to your human resources department -- one that says something like, "Please provide me with a summary of all fees paid on my 401(k) plan. By the way, have you gone through a competitive bidding process for the plan recently?"

This sort of email will get somebody's attention. You see, your employer has an obligation to only pay reasonable fees for the operation of your 401(k) plan. And there are nasty penalties that could apply if your employer doesn't operate a competitive plan.

Fees to manage 401(k) plans can range from less than one percent to more than three percent. Usually, fees are lower at larger plans because the expenses can be spread out among more participants. In any event, you want to pay as little as possible for the type of plan you have. The Department of Labor provides a good summary of fees if you are interested in doing more research.

So if employers have an obligation to ensure competitive fees why are they often paying more than they should? Benign neglect, basically.

Many 401(k) plans were set up years ago when the administrative systems were more expensive. Over the last decade, technology has driven down the cost of operating a 401(k) plan, but many employers are still on clunky platforms. And their 401(k) providers are only too happy to keep them there.

If you poke around a little bit, you'll probably get a prompt response from your employer about fees. And if the fees are high, the 401(k) provider will probably offer to make some changes. If not, then the employer will be forced to go out and seek other bids. Either way, you win with lower fees.

A quick email to HR about fees may give your 401(k) account a nice pop over the long run.