Don’t Let Hidden Investment Fees Hijack Your Retirement
Building a nest egg isn’t easy, and keeping it takes vigilance. Here are 3 ways you can protect your hard-earned money.
If you’re like most people, when you get your retirement account statements, you probably only look at the bottom line.
Are the numbers going up? Great — all is well. You can keep calm and carry on.
Some take it a bit further, of course. Their mood fluctuates day to day with Wall Street’s indices, which they track with an app between meetings at the office.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But very few people I talk with spend much time worrying about the fees they’re paying, or if they’re getting their money’s worth from their advisers and the investments they manage for them.
Many don’t even know they’re paying fees.
But those costs are a big deal. Even if you’re only paying what seems to be a small percentage — most advisers try to get at least 1% — it can eat up a major portion of your potential gains.
Think about it — thanks to the miracle of compounding, the more money in your nest egg, the bigger it grows over time. So, if you’re handing over a chunk of that money every year, you’re simply not earning as much. For example, if you had a $500,000 portfolio, you’d be giving up $5,000 a year in fees. Over 20 or 30 years, it can add up to several tens of thousands of dollars.
Once you get past the accumulation phase and move on to the preservation/distribution stage of your life, the problem grows. Now you’re talking about a triple whammy: You’re no longer contributing to your savings. You’re pulling out money for income. And the financial industry is still taking a cut.
Add in things like inflation, medical costs and taxes — more costs that people seldom contemplate — and the result is an emotional, exasperating experience as your nest egg declines.
Here are three things you can do to protect your hard-earned money:
1. Know what your real costs are.
Some things you should be looking out for include:
- Adviser fees. I’m not saying advisers shouldn’t be compensated for the work they do, but you should understand how that’s happening. Advisers who charge a percentage of assets are harder to track. See if you can get the number in a dollar amount.
- Investment costs. All transactions are not created equal. Ask your adviser about the fees you’ll have to pay to purchase, hold, sell or otherwise manage an investment. Find out if those fees will show up on your statements. If they will, find out specifically where you’ll see them. If they won’t, how will you know about them? Are there ways to avoid certain fees? Also, ask how the product’s fees and expenses compare with others that fit your goals.
2. Consider investments that “pensionize” some of your nest egg.
“Good annuities” have very low or no fees, and those fees are fully disclosed. This type of investment provides a guaranteed income — and can help you feel more confident about your future.
3. Seek out a fresh perspective.
Even if you love your current adviser, if you’re closing in on retirement, it may be time to make a change. Look for a retirement specialist who is well-versed in the products and protections that can take you to the finish line with as much money as possible in your portfolio.
Kim Franke-Folstad contributed to this article.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Don Bergis is an Investment Adviser Representative (IAR) and the founder of Authentikos Advisory, a full-service fiduciary firm focused on the protection and growth of client assets toward and through retirement.
-
Kiplinger Outlook: Telecom Companies Brace for Tough Times
The Letter The telecom industry is entering a new era that threatens profitability. But the coming Trump administration will make it easier for the major players to adjust.
By John Miley Published
-
What Does the Trump Presidency Mean for the Fed?
We take a look at what Donald Trump's potential economic plans could mean for inflation, the Fed and Jerome Powell. Here's what you need to know.
By Charles Lewis Sizemore, CFA Published
-
Time for Some Fall Financial Maintenance: Here's a Checklist
As you rake the leaves and clean the gutters, you should also consider tackling seven key year-end planning chores.
By Adam Frank Published
-
How Women Can Navigate Competing Priorities as They Age
It takes planning and some frank conversations, but women can aim for a happy and financially secure retirement while supporting loved ones. Here's how.
By Steph L. Wagner Published
-
Want Your Kids to Inherit? You Need an Asset Protection Plan
You've worked hard for your wealth. Don't let it fall into the wrong hands. Consider prenups, trusts and other protections to safeguard your family legacy.
By Tracy Craig, Fellow, ACTEC, AEP® Published
-
Five Tax Strategies to Help Your Money Last in Retirement
Having a tax strategy is crucial to making your money last. These tax-saving moves can help, whether you're years from retirement or already there.
By Scott M. Dougan, RFC, Investment Adviser Published
-
What Does the Term 'Full Coverage' Really Mean in Insurance?
For starters, there’s no such thing as 'full coverage.' Instead, you should tell your insurer exactly what kind of protection you're looking for and for what.
By Karl Susman, CPCU, LUTCF, CIC, CSFP, CFS, CPIA, AAI-M, PLCS Published
-
How Intrafamily Loans Can Bridge the Education Funding Gap
To avoid triggering federal gift taxes, a family member can lend a student money for education at IRS-set interest rates. Here's what to keep in mind.
By Denise McClain, JD, CPA Published
-
Two Consequential Tax Cases You May Not Have Heard About
The Supreme Court's decisions in these cases create uncertainty about challenging IRS regulations and guidance. Expect more litigation to follow.
By John M. Goralka Published
-
Are You an Estate Planning Procrastinator? Where to Start
Quit putting it off, because it's vital for you and your heirs. From wills and trusts to executors and taxes, here are some essential points to keep in mind.
By Alex Diaz, MBA, CFP® Published