Q. I'm 45, single, with no kids, and have a 401(k) at work. I also have a Roth IRA and a traditional IRA. Both of the IRAs are with Fidelity. I have moved most of my IRA money into low-cost Fidelity index funds. Recently, I took the time to investigate how much my 401(k) funds cost me. I was shocked. Even choosing the least expensive funds in my plan, the costs are much higher than in my two IRAs. (That's partly because the company that manages our 401(k) has its own fees, I guess, in addition to the usual fund expenses.) I make too much money to get a tax deduction for contributing to my traditional IRA, but I still can contribute to my Roth IRA.

Would it make sense to cut my 10 percent contribution to my 401(k) in half, putting 5 percent of my income into my Roth IRA with its lower costs? It's hard to know whether I'll retire in a tax bracket that's higher or lower than I'm in right now (although I'm pessimistic and expect taxes will go way up before I retire, simply because we'll need to pay off so much government debt). So it's hard to calculate whether paying taxes now on contributions to my Roth is better than getting the tax deduction now by contributing to my expensive 401(k).

The idea of paying so much for my 401(k) funds is almost nauseating. I know that what I pay for some of my Fidelity index funds in my Roth IRA is as low as 0.10 percent. I've thought about stopping all 401(k) contributions and contributing only to my Roth, but I do like the tax deduction in each paycheck.

I wonder if there are a lot of other people who have thought about this. My hunch is a lot of folks don't know how expensive their 401(k) really is— at least, compared to investing in low-cost index funds in their own IRAs. What should I do? —D.Q., by email from Austin, TX

A. You're ahead of the crowd, but lots more people are starting to see things your way. Fortunately, so are more employers. As a result, we can expect to see major pressure on fund providers for 401(k) and 403(b) plans as employers and employees both reject paying 1.5 and 2 percent a year to manage their retirement savings. Indeed, I expect even lower cost providers like Fidelity and T. Rowe Price to face pressures. As John Bogle demonstrated in a recent column, the difference fees make over time is gigantic— it is often measured in years of final income.

Your notion of putting more in the Roth IRA, and less in the 401(k), is a good one. Here's why. As a single person, you are more likely to be in a higher tax bracket when you retire. You are more likely to have to pay taxes on your Social Security benefit if you take large withdrawals from a conventional IRA. So you are likely to be saving in three ways: lower investment fees, lower income taxes, and reduced taxes on Social Security benefits.

Q. I’d like some advice for my two youngest children. Both are college graduates with good jobs and excellent benefits. They are 26 and 23, both single. One has a reasonable mortgage and the other lives at home with me. They have no school debts, no car payments, no credit card debt, and they are very careful with their spending habits. The wife and I are
very lucky. They would like to open Roth IRA accounts and contribute the max while they can. How should they proceed? —T.M., by email

A. This is a great idea! Unless they have unusually high incomes for young adults, they are probably paying income taxes at a 15 percent rate. So it's no great sacrifice to pay taxes today in order to pay no taxes in the distant future. If they open their Roth IRA accounts at Vanguard, Fidelity or Schwab, they will be able to invest in low-cost index mutual funds or exchange-traded funds. They should also be able to do this and pay zero on commissions for basic exchange traded fund purchases.