401(k) administration fees vs Rollover IRA fees?

Question

I'm evaluating rolling over my old 401(k) into a self-administered IRA. I know the general costs and benefits (mostly benefits, in terms of increased flexibility, as stated here), but I'd like to see if I can precisely quantify the difference.

In particular, I'm curious as to the difference in administration fees for positions held at the same broker/account manager (Vanguard, Fidelity, etc). I've heard that 401(k)'s are much more expensive, i.e. double or triple the cost of IRAs held at the same funds. In other words, even at the same provider it makes sense to roll over your 401(k)'s into an IRA.

To take a concrete example, I can easily find the admin cost of the Vanguard 500 Index Fund Investor Shares (VFINX): it's a super-low 0.18% a year (see here). Can someone tell me what I'd be paying if I was invested in that fund as part of a 401(k) plan?

Even if you don't have links with Vanguard-specific information, it probably helps if you post links for other companies, since other readers are likely invested with those.

Thanks!
/YGA

Answer 1

You're confusing 401k administrative fees with fund expense ratios. Generally speaking, a rollover IRA from a discount broker has no administrative fees today. In the past, some brokers have charged nominal fees.

In the Vanguard example, as a personal investor, you'll be investing in VFINX or, if you have a large account, the Vanguard 500 Index Fund Admiral shares (VFIAX), which has a 0.07% expense ratio. If you were part of a huge 401k plan, you could possibly invest in an institutional-class version of the same fund, such as VINIX, if your company's plan in aggregate had a substantial investment.

When you're buying index funds, don't forget ETFs. They generally offer really low expense ratios, and many brokers are allowing you to trade specific ETF families for free.

Answer 2

It depends on the 401(k) provider. They are the ones setting the fees. I'd be surprised if the 401(k) fees for Vanguard specifically were lower through a 401(k) than they were directly.