Question: We’ve noticed that the average fund expense ratios for several options in our plan’s investment line-up continue to decrease on a fairly consistent basis. Is this part of an industry trend?
Answer: As a matter of fact, 401(k) plan participants have incurred substantially lower fees for holding mutual funds over the past two decades, according to recent research from the Investment Company Institute. The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2023, shows that from 2000 to 2023, the average equity mutual fund expense ratio paid by 401(k) investors dropped by more than half (60%), offering them potentially higher returns and balances in retirement. The average bond mutual fund expense ratio has dropped by 63%.
In addition, from 2008 to 2023, average target date fund expense ratios have also dropped by more than half.
