Individual retirement account investors who hold mutual funds are increasingly concentrated in the cheapest options on the market, adding to a long-drawn trend of fee compression in the fund industry at large.
A new fact sheet from the Investment Company Institute lays out how 94% of IRA equity mutual fund assets sat in funds charging expense ratios below 1.00% at the end of 2025, while the asset-weighted average expense ratio paid by IRA equity fund investors fell to 0.47% last year, down from 0.98% two decades earlier.
The finding adds a retirement-specific data point to what has become one of the most consistent trends in fund pricing: investors, regardless of account type, are voting with their dollars for cheaper share classes.
ICI's latest data drop shows IRA mutual fund investors pay expense ratios that run only modestly above the broader fund industry.
For equity funds, the industry-wide asset-weighted average expense ratio stood at 0.40% in 2025, compared with 0.47% for IRA investors and 0.27% for 401(k) plan participants in the same funds. Hybrid and bond fund figures followed a similar pattern, with IRA investors paying slightly more than the industry average but notably more than plan participants.
ICI attributed the gap between IRA and 401(k) costs mainly to economies of scale – employer plans pool the savings of hundreds or thousands of workers, which lowers per-participant costs – and to the fact that IRA investors more often pay for financial-professional guidance through a fund's 12b-1 fee, which is embedded in the expense ratio itself.
"401(k) plan participants have generally had more limited access to professional financial advice, so 401(k) plans commonly select funds (or fund share classes) that provide no compensation for financial professionals – which partly explains their somewhat lower expense ratios," ICI said in its flash data report.
The IRA-specific numbers extend a fee-compression story that InvestmentNews has tracked for more than a year. A March 2026 ICI report found equity mutual fund expense ratios had fallen 62% since 1996, driven in large part by the shift toward no-load share classes and the growing dominance of index strategies. That earlier report showed 92% of gross sales of long-term mutual funds went to no-load funds without 12b-1 fees last year, nearly double the share seen at the turn of the century.
The IRA fact sheet reinforces that trajectory from the retirement-savings side. IRAs represent the single largest pool of US retirement assets, a point underscored by a separate ICI dataset showing total US retirement assets reached a record $49.1 trillion at the end of 2025. Within IRAs specifically, the ICI fact sheet put total assets at $18.7 trillion at year-end 2025, with 40% of that total invested in mutual funds.
Another ICI survey release from May, drawn from the group's mutual fund shareholder survey, found that more than nine out of 10 mutual fund-owning households considered fees and expenses when selecting a fund in 2025, and about half called cost a very important factor.
Vanguard, which pioneered the trend of low-cost investing that turned into a race to the bottom in fees, slashed expense ratios again in February in a move that it said would save investors nearly $250 million this year. Counting last year's price cuts, it claimed to deliver almost $600 million in fee savings in the past two-year period.
Shelly Antoniewicz, ICI's chief economist, said mutual fund investors continue to be drawn to the products for their "flexibility, diversification, cost-effectiveness, and professional management."
The survey also found that 72% of mutual fund-owning households held funds outside an employer-sponsored retirement plan, a reminder that fee sensitivity extends well beyond the workplace account.
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