The Investment Company Institute (ICI) just confirmed what many of us have seen on the ground: 401(k) mutual fund fees keep dropping, and that’s great news for plan participants.
According to ICI’s 2024 report, average equity mutual fund expense ratios in 401(k) plans have fallen 66% since 2000—from 0.76% to just 0.26%. Bond and hybrid fund fees dropped, too. Even target-date mutual fund fees fell 57% over the last 16 years, now averaging 0.29%.
What’s driving this? A few things:
· Fierce competition among fund providers;
· Plan sponsors who know what they’re doing and opt for low-cost share classes;
· Economies of scale;
· And participants who are (finally) paying attention to fees.
Bottom line: The 401(k) market works when it’s built right. Lower costs mean more savings stay in participants’ pockets, and this trend shows no sign of stopping.