How do companies that manage 401ks for employees make money? Is my employer paying them to manage my 401k?

The company that currently manages my 401k told me that I would not have to roll it over when I change jobs - that I could leave it with them.



However, now I am wondering if they are going to charge me if I leave with them and no longer work for my old employer.How do companies that manage 401ks for employees make money? Is my employer paying them to manage my 401k?
They might charge you...doubtful but it's a possibility. If you left it in your employer's 401k then you would incur the same level of fees that you do now. If you roll into into an IRA with them they likely will put you in assets that have slightly higher fees.



Here's the kicker....the fees aren't generally labeled with the word ';FEE';. They are built into the expense ratios of a fund. What the mutual fund does is add up the value of every stock, bond, cd, and piece of cash that is owned by the fund. It then multiplies that amount by the expense ratio. This is the amount that they collect in fees. They then lop that piece right off the top and come up with what's called the Net Asset Value (NAV) which is value after expenses. They then divide the NAV by the number of shares and come up with the price that the mutual fund will be valued at (purchased at) the following day. This is also called the NAV.



So, you are getting charged a daily fee...you just don't see it. What you need to make sure is that is that expense ratio that you are paying worth the returns that they are providing. In many cases the expense ratios inside a 401k are so much lower for the exact same funds that it's worth it to leave it in there rather than rolling it into an IRA with the same company.How do companies that manage 401ks for employees make money? Is my employer paying them to manage my 401k?
Yes, your company pays them and you do, too. You would be better off rolling it over into an IRA of your choice.