Individual retirement account investors who hold mutual funds are gravitating toward the cheapest share classes, according to fresh data from the Investment Company Institute. The trade group's latest fact sheet reveals that 94% of IRA equity mutual fund assets resided in funds charging expense ratios below 1.00% at the end of 2025. The asset-weighted average expense ratio paid by IRA equity fund investors dropped to 0.47% last year, a steep decline from 0.98% two decades earlier.
The findings add a retirement-specific lens to the broader fee-compression trend reshaping the fund industry. Investors across account types are increasingly selecting lower-cost options, a shift that has accelerated with the rise of index strategies and no-load share classes. ICI's data shows IRA costs track closely with industrywide averages: for equity funds, the overall 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.
Hybrid and bond fund figures followed a similar pattern, with IRA investors paying slightly more than the industry average but notably more than 401(k) participants. ICI attributed the gap primarily to economies of scale in employer-sponsored plans, which pool assets from hundreds or thousands of workers, lowering per-participant costs. Additionally, IRA investors more frequently pay for professional financial guidance through a fund's 12b-1 fee, which is embedded in the expense ratio.
"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 has been building for years. A March 2026 ICI report found equity mutual fund expense ratios had fallen 62% since 1996, driven largely 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.
IRAs represent the single largest pool of U.S. retirement assets, a point underscored by a separate ICI dataset showing total U.S. 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. For context, IRA assets hit $19.2 trillion as rollovers from 401(k) plans continue to fuel growth.
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 low-cost investing, 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 over 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 trend toward lower costs shows no signs of reversing, as advisors and their clients increasingly prioritize fee efficiency in portfolio construction.
