To illustrate what we talked about in our last blog here is an exert from a report by Robert Hiltonsmith on fees
"Do you know how much you pay for your retirement plan? If you’re like many Americans saving for retirement in a 401(k)i , the answer is “no.” An AARP survey 1 found that 65 percent of 401(k) account-holders had no idea they were even paying fees, and 83 percent, or 5 out of every 6, lacked even basic knowledge about the many fees and expenses that everyone with a 401(k) pays. These include fees to cover the costs of advertising the plans and the companies who run them, fees to pay various investment managers of the funds in the plan, even fees to cover the costs of buying and selling the underlying stocks and bonds in which retirement accounts are invested. These fees, however, are taken “off the top” of investment returns or share prices—in other words, the rates of return and share prices reported to you in account statements and plan documents are post-fee. Because of this, retirement and bank account statements contain no evidence of these fees, and thus account holders generally have no inkling how much all of this costs them. Excessive 401(k) fees can take a surprisingly large bite out of the retirement savings of American families who are already struggling to save amidst long-stagnant wages and an idling economy. Dēmos has calculated that an “ordinary” American household (details provided later in this brief) will pay, on average, nearly $155,000 over the course of their lifetime in effective total fees. To put this in perspective, this household could have bought a house with the amount they paid in fees. This is a price that families already trying to weather the risks of the contemporary U.S. economy can scarce afford to pay. The country needs to implement one of the many more efficient retirement savings ideas that have been proposed by institutions and individuals across the political spectrum to give all Americans a reasonably-priced means to save for retirement.
A higher income worker making approximately $90,000 per year will lose upward of $277,000.
Read the complete report at
http://www.demos.org/sites/default/files/publications/TheRetirementSavingsDrain-Demos_0.pdf
What to take from this: You need to find out what fees you are paying and why. Ask the your financial adviser for a complete list.
In the next Blog we will discuss ways to avoid these challenges.
As usual please send us your comments and any topics you would like to discuss.
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