retirement

4 Ways to Help Keep Fees and Taxes From Nibbling Your Nest Egg

At least three-quarters of the people who come to see me are paying more in fees than they realize. Over the years it could add up to tens of thousands. But there are some things you can do about it.

A woman came to my office recently to get my opinion on how her adviser was managing her portfolio.

She was in her early 50s, divorced and raising one child, and she had $250,000 stocked away in an account with a major brokerage.

I asked her to bring in her statements so I could do a fee analysis, and she balked. “I don’t need that,” she said. “They told me my fees are really low.”

“But how do you know for sure?” I asked.

“Because they told me.”

She was there for a second opinion because she wanted to get the most return on her investments. She wasn’t even thinking about fees, taxes or anything else that might be eating away at her portfolio’s bottom line.

And she’s not unusual. At least three-quarters of the people who come to see me are paying more in fees than they realize. (Some don’t even know they’re paying fees at all.)

They feel guilty about getting a second opinion because they “love” their current financial professional who is “just so nice.”

What I say instead is that there’s only so much we can do with money that’s invested in the market. We can help manage risk and choose each financial vehicle with care. In the end, though, the market is going to do what the market is going to do.

But what we also can do is be proactive about reducing fees and taxes, and help make their portfolio more efficient that way. Over decades, we could be talking about saving tens of thousands of dollars, maybe more – maybe even enough to retire earlier than they originally planned.

Here are some things you can do to help preserve your money:

1. Get a second opinion.

If you feel as though your financial professional is always selling you something instead of giving you advice, or if after a meeting you still aren’t clear on costs or what strategies are in place to deal with taxes and inflation, it may be time to move on. Many financial professionals will meet with you at least once at no charge, so you really have nothing to lose and potentially much to gain.

2. Do your homework on fees.

Read your statements (and not just the number in bold at the bottom). Check out the prospectus when you purchase something, or have your financial professional go over it with you. This legal document has the facts you need to make an informed decision. Ask about the fees you’ll pay to buy, sell, hold or otherwise deal with each financial asset. Know which fees will be on your statements and which ones won’t, and ask how you can track the ones that aren’t there.

3. Be sure tax efficiency is a major part of your overall plan.

Taxes can affect your savings to and through retirement, and can even take a piece of your legacy. If most of your money is in a 401(k) or IRA, consider converting some of it to tax-efficient accounts. You can do this over time to help avoid taking a hit when you withdraw the money in retirement and continue to grow your nest egg in an efficient manner.

4. Work with a fiduciary.

A financial professional who is held to the fiduciary standard is legally obligated to recommend products based on the best interests of clients. Being held to the fiduciary standard also requires that one must fully disclose his compensation and any conflicts of interest. This is especially important if you are at or near retirement age.

Many individuals get used to just going along with whatever a financial professional recommends. But the more you know, the better your chances of making and keeping the most cash for retirement.

Kim Franke-Folstad contributed to this article.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Core Financial are not affiliated companies. Investing involves risk, including the potential loss of principal. Any references to protection benefits, safety, or security, generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.

About the Author

Philip Gordley, Investment Adviser

President and Founder, Core Financial

Philip Gordley is an independent financial adviser in Albuquerque, N.M. The president and founder of Core Financial, he has more than 35 years of experience in the insurance and investment industry and has a bachelor's degree from Quincy College. Phil has been married for 26 years to his wife, Zora, and they have two teenage daughters.

Most Popular

Dying Careers You May Want to Steer Clear Of
careers

Dying Careers You May Want to Steer Clear Of

It’s tough to change, but your job could depend on it. Be flexible in your career goals – and talk with your kids about their own aspirations, because…
September 13, 2021
5 Top Dividend Aristocrats to Beef Up Your Portfolio
dividend stocks

5 Top Dividend Aristocrats to Beef Up Your Portfolio

The 65-member Dividend Aristocrats are among the market's best sources of reliable, predictable income. But these five stand out as truly elite.
September 14, 2021
7 Best Commodity Stocks to Play the Coming Boom
commodities

7 Best Commodity Stocks to Play the Coming Boom

These seven commodity stocks are poised to take advantage of a unique confluence of events. Just mind the volatility.
September 8, 2021

Recommended

The Time to Start Your Holiday Shopping Is Right Now
Making Your Money Last

The Time to Start Your Holiday Shopping Is Right Now

Shortages of the popular toys and gifts due to logistical delays could be massive this holiday shopping season. Expecting guests? Toilet paper towels,…
September 28, 2021
Family Business Survival Strategies in an Era of Sweeping Tax Reform
tax planning

Family Business Survival Strategies in an Era of Sweeping Tax Reform

Changes to our nation’s income taxes, capital gains taxes and estate taxes – whether already passed or still in the proposal stage – pose massive chal…
September 28, 2021
The Forces Shaping Retirement in the 2020s
Coronavirus and Your Money

The Forces Shaping Retirement in the 2020s

Gone are the days of retiring with a pension and gold watch. What retirement means has changed significantly and not always for the better.
September 28, 2021
Hidden Fees, Unintentional Wealth Transfers and Other Lurking Retirement Hazards
Making Your Money Last

Hidden Fees, Unintentional Wealth Transfers and Other Lurking Retirement Hazards

A secure retirement is a happy retirement. Here are three things you can do to improve your odds that your golden years will be bountiful and worry-fr…
September 28, 2021