Most 401k retirement accounts charge a fee for account management. The amount of this fee is stated as “basis points.” A single basis point represents 1/100th of one percent of the total value of your 401k. You can calculate these fees by converting the basis points into a dollar amount based on the overall value of your 401k account.
Determine the actual value of your 401k account. For example, assume the value of your 401k is $250,000.
Determine the basis point fee charged for management of your 401k account. For example, assume this fee is five basis points.
Convert the basis point fee to a percentage by multiplying the basis points by .01. Continuing the same example, 5 multiplied by .01 equals .05.
Multiply the basis point percentage from Step 3 by the value of your 401k. Concluding the example, $250,000 multiplied by .05 is $12,500. This figure represents the management fee assessed on your 401k account.
- "Principles of Finance"; Scott Besley and Eugene Brigham; 2008
- MathIsFun.com: Percentage Points