What does a 0.50% expense ratio cost compared with 0.03% on a $100,000 rollover?

By Kaz · Published 6 October 2026 · How this site checks figures

Summary

About $44,800 over 25 years in this site's example: $100,000 left alone at a 6% gross annual return grows to $426,161 with a 0.03% expense ratio and to $381,339 with 0.50%. The first year's difference is only $470, $30 against $500. Fees actually paid across the 25 years account for about $23,900 of the gap; the other $20,900 is growth that the fee money would have earned had it stayed invested.

The numbers at 10, 20 and 25 years

Years	0.03%	0.15%	0.50%	Gap, 0.03% vs 0.50%	Gap as a share of the 0.03% balance
10	$178,579	$176,567	$170,814	$7,764	4.3%
20	$318,903	$311,758	$291,776	$27,127	8.5%
25	$426,161	$414,259	$381,339	$44,821	10.5%

These are illustrations, not forecasts. They assume a single $100,000 deposit, no further contributions, and the same 6% gross return every year, which no fund promises. The three expense ratios are round numbers chosen for the arithmetic, not quotes for any particular fund. Each year the balance is multiplied by 1 plus the return minus the expense ratio: for 0.50%, that's 1.055 a year, and for 0.03%, 1.0597. Calculated October 6, 2026.

Why the gap is bigger than the fees

Add up what the 0.50% fund takes each year and you get about $25,600 over 25 years. The 0.03% fund takes about $1,600. So only around $23,900 of the $44,800 difference is money that went to the fund company. The rest is growth that never happened: every dollar deducted in year 3 was a dollar that couldn't compound for the next 22 years.

This is also why the first-year figure misleads. $470 a year sounds like the cost. Measured over a rollover that stays invested until retirement, it's closer to $1,800 a year on average.

Where your own numbers come from

Investor.gov defines the expense ratio as "The percentage of a fund's average net assets used each year to pay the fund's operating expenses," and it's printed in the fee table of the fund's prospectus. You won't see it deducted on a statement. The Labor Department's guide to 401(k) fees says investment fees are "deducted directly from your investment returns."

Inside a 401(k), the annual fee disclosure already gives you the figure in dollars: each fund's cost per $1,000 invested. 0.03% is $0.30 per $1,000; 0.50% is $5.00. How to read the 401(k) fee disclosure shows where that column sits and how to turn it into a yearly dollar figure for your own balance.

A check against the Labor Department's example

The same subtraction method reproduces the DOL's published example. The guide starts with a $25,000 balance, 35 years and a 7% return, and says the account grows to $227,000 if fees reduce returns by 0.5% and to $163,000 at 1.5%. Run it with the formula above: $25,000 × 1.065 to the 35th power is about $226,600, and $25,000 × 1.055 to the 35th power is about $162,800, which round to the DOL's figures. A fee comparison that lands far from these numbers with the same inputs is using a different method, and that method is the first thing to ask about.

What the expense ratio leaves out

An IRA can add an account fee, an advisory fee or trading costs that sit outside the fund. A 401(k) can add a flat recordkeeping charge. None of those are in the expense ratio. The fee calculator takes a percentage fee and a flat annual fee for an old plan, a new plan and an IRA at once, and what a 1% fee costs over 25 years runs the same idea with yearly contributions added. For the account-level charges at specific brokers, see the comparison of rollover IRA providers.

Sources

Written by Kaz, an independent publisher.
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