Question about my employer-sponsored Roth 401k plan fees

[teacherman]

I have a question that I believe can be answered quickly. I am new to the investing world and learning slowly. I have been participating in my employer's Roth 401k plan. I am realizing that perhaps I want to opt out (there is no employer match--budget cuts). On the plan info it describes the fees as follows:

"Plan Administrative Fees 1.4% assessed on total plan assets. Allocated among all participants’ accounts and deducted each quarter."

That seems high to me... am I correct? Would you recommend forgoing this plan and investing on my own? Thanks!

[NYD3030]

A thousand times yes.  1.4% is not astronomical but still way to high compared to what you'd get through Vanguard.  The only reason to tolerate the often times absurd fees of an employer plan is the match.  Without the match you can do much better with a Roth IRA through someone like Vanguard, and fee measured in tenths of a percent.

The only other consideration is the higher contribution limit on a Roth 401k vs a Roth IRA.  Following the Mustachian Mandates, you'll hit the $5,500 limit on a Roth IRA pretty quickly.  At that point you have to figure out if the tax advantage is worth the extra fees.  IMO it is not, but I also value the liquidity of having taxable investments pretty heavily.

[Jack]

My employer-sponsored plan (albeit a SIMPLE IRA in my case) has a similarly-ridiculous "administrative fee", but in my case the bulk of that money is actually the premium for a "life insurance" component (where if you die, your heirs get back the value of your investments or the value of your contributions, whichever is higher).

Could it be that your 401K has a similar weird insurance plan incorporated with it?

(Before anyone asks: no, I am not allowed to opt-out of the insurance aspect... I would have if I could have!)