As a solo contractor, a small practice owner, or a partner in a group practice, you will definitely want to consider a retirement plan to minimize your tax liability and to save for retirement.  While the types of plans available for solo contractors and small practice owners are nearly identical, the cost of your plan can vary significantly.  Asset-based fees are rarely in your favor, so it is always a good idea to try to minimize these types of fees in favor of fixed/flat fees. This calculator was designed to compare these very different types of fees side by side so that you can evaluate the long term effect of fees on your investment portfolio.

Before you begin, the first step is to identify who your providers are and what services you are paying for. There are two types of platforms: open architecture and bundled.  Typically, a bundled platform might include a single ‘all-in’ fee, while an open-architecture platform might have separate service provider fees.  Most retirement plans will have a Third Party Administrator (TPA), a record-keeper (many have their own TPAs) and a custodian (often integrated with the record-keeper).  Your plan can also have a broker or an adviser (typically in a fiduciary capacity).

The next step is to collect the information on all of the fees your providers are charging for your plan. If you have a ‘solo’ 401k or a ‘solo’ Cash Balance plan, you will need to get the detailed cost breakdown from your plan provider and/or your adviser.  If you have a practice with employees, you will need to ask your plan providers for a full 408(b)(2) fee disclosure to understand all of the fees you are paying.  Some providers may cut corners, so you might have to put everything together by looking at service contracts and various disclosures from multiple providers. The mutual funds inside the plan can pay significant revenue sharing to third parties, and the fee disclosure should show the total expense ratio for all of your plan investments.  Your broker might also be charging a fee and getting a commission as well, so that’s something that must be disclosed on the 408(b)(2) fee disclosure.

Some notes about how to use this calculator:

  1. This calculator was designed to compare two providers: a typical one that mostly charges asset-based fees, and one that offers the same or better services, but charges mostly fixed/flat fees.  Asset-based fees directly diminish your investment return, and the difference in cost over time can be significant.  This extra cost can be especially problematic if you are not getting any more benefit while paying exponentially higher fees as your investment grows.
  2. Any fees you pay after-tax are tax-deductible as a business expense, so that definitely helps to lower your cost if the fees are not taken out of the account.
  3. Many record-keepers have per-participant fees, so the number of participants will determine that part of the overall fee.
  4. Mutual fund expense ratio can vary significantly, so you can either use an average value, or calculate the value you are paying for your specific portfolio.
  5. The cost shown by this calculator is cumulative, so after N years you’ll see the total cost difference for both providers.  While the flat fee provider might start with a higher cost difference, over time this shifts dramatically as the cost of asset-based fees will dominate because of compounding after reaching a ‘breakeven point’ where both fees are equal.
  6. Always compare apples to apples.  While fees are important, it is key to understand what services you are paying for, so if you don’t get all of the necessary services for your plan, having the lowest cost might not be such a big advantage.

To see all the data please swipe to the right

Service Provider #1
(Asset-based fees and flat/fixed fees)
Service Provider #2
(Flat/fixed fees)
Advisory % (asset-based) $ (flat)
Mutual fund expense ratio % %
Administrative fees (asset-based) % % **
Administrative fees (flat) $ $
Base Fee (TPA and/or Recordkeeper) $ $
Cross Tested Plan Fee (if any) $ $
Per Participant Fee $ $

* All administrative and advisory fees paid directly (rather than taken from plan assets) are tax-deductible as a business expense

** Many record-keepers charge a small asset-based fee that is typically 5 basis points

Horizon (Years)
Asset Growth, Service Provider #2 (Flat fees)
Asset Growth, Service Provider #1 (Asset-based fees)
Difference In Asset Value (Cumulative)

Note: Negative difference means that the cost of Service Provider #1 is higher than the cost of Service Provider #2.