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Hey, it’s Jeffrey — back again!
I have a solo 401k. Total control over every fund, all index funds, expense ratios under 0.10%. I check it regularly, so I know everything’s fine.
My wife has various 401(k)s and 403(b)s from previous employers, with one we never rolled over. It's sitting at a large financial services company, and neither of us had looked at it since she left that job.
She didn't actually pick the funds. She picked a risk level when she started the job, and the financial services company allocated her across the plan's lineup automatically. That's how most employer plans work — you answer a few questions, they spread you across a mix of funds, and you never think about it again.
The problem is you don't know what you're paying. The plan doesn't tell you. It just quietly takes it.
Here's the prompt I used:
I'm going to paste my current retirement account
holdings below. Run a fee audit with the following:
1. Look up or estimate the expense ratio for each fund.
Flag any you're uncertain about.
2. Calculate my current weighted average expense ratio
based on balances.
3. Flag every fund with an expense ratio above 0.10% —
these are the ones worth questioning.
4. For each flagged fund, suggest the closest low-cost
index fund equivalent. If I've listed my full fund
menu, prioritize alternatives already in my plan.
5. Calculate my estimated annual fee drag in dollars,
compared to if my portfolio were at a 0.05%
weighted average.
6. Project that annual difference over
[YEARS_TO_RETIREMENT] years, assuming
[EXPECTED_RETURN]% average annual return.
Show me the compounded dollar gap.
Here are my holdings:
[PASTE FUND LIST — name, balance or %, ER if you have it]
Total balance: $[TOTAL_BALANCE]
Years to retirement: [YEARS_TO_RETIREMENT]
Expected annual return: [EXPECTED_RETURN]%
If cheaper alternatives already exist in my fund menu,
flag that specifically.
What we found:
Her 403b has index fund options — Fidelity 500 Index, Extended Market, Total International, US Bond — with expense ratios between 0.015% and 0.06%.
About 20% of her balance ended up in those. The other 80% got auto-allocated into actively managed funds charging significantly more — including MFS Value at 0.44% and MFS Massachusetts Investors Growth Stock at 0.37%, which together made up over 40% of the account.
She didn't choose those funds. The plan put her funds there by default.
When you calculate a weighted average expense ratio across all her holdings — including the index fund slice — it came out to about 0.48%. Moved entirely into the index funds already in the plan, that drops to roughly 0.03%. With her balance, that difference is about $357 a year.
Compounded over 20 years at 7%, that's roughly $18,000 that stays with the fund managers instead of us.
And these aren't even bad funds. MFS Value and MFS Massachusetts Investors are legitimate, professionally managed funds with reasonable expense ratios by active fund standards. Plenty of employer plans have funds charging 0.70%, 0.80%, even over 1%.
If your plan has those, run this prompt. Your 20-year number is going to be a lot bigger than ours.
The cheaper funds were already there. We just never had a reason to move them. Now we do.
Keep going? Once you've run the audit, try these follow-ups:
"Which of my current expensive funds have a nearly identical cheaper version already in my plan? Show me a side-by-side comparison."
"If I moved [X%] from [expensive fund] to [cheap fund], what would my new weighted average ER be and how does that change the 20-year projection?"
"Are there any reasons I might want to stay in an actively managed fund in this lineup despite the higher cost?"
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