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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free 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.
-
Stocks Hit Fresh Highs Ahead of the Fed As Earnings Pump Optimism: Stock Market TodaySHW and UNH were two of the best Dow Jones stocks Tuesday, thanks to solid earnings reports, and MSFT closed with a $4 trillion market cap.
-
Selling Your Haunted House? What You Have to Tell Buyers (and What You Don’t)You don’t need ghosts to spook buyers, sometimes a home’s past is enough. Here’s what sellers should know about disclosure laws, pricing and perception when a property has a haunted history.
-
Debunking Three Myths About Defined Outcome ETFs (aka Buffered ETFs)Defined outcome ETFs offer a middle ground between traditional equity and fixed-income investments, helping provide downside protection and upside participation.
-
This Is Why Judge Judy Says Details Are Important in Contracts: This Contract Had HolesA couple's disastrous experience with reclaimed wood flooring led to safety hazards and a lesson in the critical importance of detailed contracts.
-
A Lesson From the School of Rock (and a Financial Adviser) as the Markets Go Around and AroundIt's hard to hold your nerve during a downturn, but next time the markets take a tumble, remember this quick rock 'n' roll tutorial and aim to stay invested.
-
I'm a Financial Pro: This Is How You Can Guide Your Heirs Through the Great Wealth TransferFocus on creating a clear estate plan, communicating your wishes early to avoid family conflict, leaving an ethical will with your values and wisdom and preparing them practically and emotionally.
-
To Reap the Full Benefits of Tax-Loss Harvesting, Consider This Investment Strategist's StepsTax-loss harvesting can offer more advantages for investors than tax relief. Over the long term, it can potentially help you maintain a robust portfolio and build wealth.
-
Social Security Wisdom From a Financial Adviser Receiving Benefits HimselfYou don't know what you don't know, and with Social Security, that can be a costly problem for retirees — one that can last a lifetime.
-
Take It From a Tax Expert: The True Measure of Your Retirement Readiness Isn't the Size of Your Nest EggA sizable nest egg is a good start, but your plan should include two to five years of basic expenses in conservative, liquid accounts as a buffer against market volatility, inflation and taxes.
-
New Opportunity Zone Rules Triple Tax Benefits for Rural Investments: Here's Your 2027 StrategyNew IRS guidance just reshaped the opportunity zone landscape for 2027. Here's what high-net-worth investors need to know about the enhanced rural benefits.
