retirement

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.

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.

About the Author

Donald B. Bergis, Investment Adviser

Founder, Authentikos Advisory

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. 

Most Popular

‘I Can’t Retire – I Need Health Insurance’
health insurance

‘I Can’t Retire – I Need Health Insurance’

Health insurance is seen as a huge hurdle for early retirees, but the answer to finding affordable coverage could be simpler than you think.
August 7, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The Inflation Reduction Act and Taxes: What You Should Know
Tax Breaks

The Inflation Reduction Act and Taxes: What You Should Know

The U.S. Senate has passed the Inflation Reduction Act of 2022—a climate, energy, healthcare, and tax bill that would increase IRS funding, and change…
August 8, 2022

Recommended

What Hidden Obstacles May Snag Your Retirement? 5 Key Points to Consider
retirement

What Hidden Obstacles May Snag Your Retirement? 5 Key Points to Consider

To avoid getting hung up unexpectedly, plan for retirement using the “TRICK” method, which stands for taxes, risk tolerance, investment mix, costs and…
August 6, 2022
Tech Support Fraud Targets Seniors
retirement

Tech Support Fraud Targets Seniors

Get a message offering help with a computer problem you didn’t think you had? It’s probably a scammer looking for your money and personal information
August 5, 2022
Will a Recession Affect Your Retirement? How to Take Action Now!
retirement

Will a Recession Affect Your Retirement? How to Take Action Now!

A bear market or an economic downturn can be scary, especially for retirees. However, solid financial plans are built to withstand these challenges. H…
August 5, 2022
Should You Treat Your Kids Equally in Your Will? 12 Financial Planners Weigh In
retirement

Should You Treat Your Kids Equally in Your Will? 12 Financial Planners Weigh In

What's the "fair" way to divide an estate? Many parents think they should divvy things evenly among their children ... but that can backfire. So what'…
August 1, 2022