Retirement Planning Question: Are Your Savings Account Fees Higher than Your Returns?

Retirement savings plans may come with hidden fees you're not aware of
Retirement savings plans may come with hidden fees you’re not aware of

It’s no secret how crucial investing in retirement savings is in order to live a comfortable life in your Golden Years. While such savings accounts are extremely helpful in building a financial cushion for later in life, an important retirement planning question you should be asking is, “How much is my retirement savings accounts costing me in terms of hidden fees?” While accounts such as 401(k)s are invested in to provide financially throughout retirement, you might be surprised to find out how much these nest eggs are costing you.

How Much Are You Actually Paying in Retirement Investment Fees?

You might not want to hear the answer – although you should. On average, fees on your 401(k) can actually reduce your accumulated total up to as much as 30 percent, no matter how much you have invested in this account.

Yet many Americans are completely unaware at how much they are being charged for these fees. In fact, according to a survey commissioned by investment adviser Rebalance IRA, close to half of Americans in their 50s and 60s who are employed full-time believe retirement savings accounts aren’t subject to any fees.

Other respondents to the survey – about 19 percent – believed they paid 0.5% or less in fees annually, while another 26 percent believed they were paying between 0.5 percent and 1.5 percent. Unfortunately, what you don’t know, you can’t change.

If you work for a small company, odds are you’re paying more for your 401(k) than you would be if you worked for a larger company. The reason for this is because small businesses don’t get the economies of scale that big companies get.

Mutual fund returns in 401(k) plans are typically reported as net returns. This means that the numbers you see are those that were calculated after fund management fees have been subtracted from your profits, or added to your losses. Other fees will also be deducted before you see these finals number, such as administrative fees, which many times are divided among plan participants but aren’t clearly stipulated on individual investment statements.

Such a lack of transparency when it comes to these seemingly ‘hidden’ fees can be a frustrating thing for investors.

How Employees Can Determine the Fees Paid on Their Retirement Savings Accounts

It’s important to identify precisely how much you’re paying in fees when it comes to your retirement savings. After all, this number will come into play when you’re budgeting for your nest egg, so having an accurate number is critical.

Retirement planning
Do you know how much you’re paying in retirement savings plan fees?

Employees should be able to check their specific 401(k) fees by browsing their particular plan’s website, which should outline all the nitty gritty when it comes to the fine print in fees. Plan members should also speak with their financial advisors regarding the synopsis of the mutual funds that they have invested in.

High Fees Might Be Worth It

While the answer to your retirement planning question regarding fees may not be a pleasant one, it’s vital information you need to be aware of in order to plan properly. However, identifying and understanding your fees is essential, it’s also important not to focus solely on such fees. There are plenty of retirement investment options that are excellently managed, and many times this doesn’t come cheap. They may be providing you with fantastic results. It’s important to understand the fees you’re paying on your retirement saving plan, and to determine whether or not such fees are worth your investment.

Explore Your Options for Lower Fees

If you work at a company, you might start by talking with your Human Resources department.  They  may be able to clearly tell you about the fees you are paying.  For investments you are making on your own, go ahead and ask the banking institution.  And, if you are working with a financial advisor, be sure to ask him or her for a clear explanation of the fees you are paying for the investments — beyond whatever you pay for the advice.

A financial advisor can be an invaluable resource for all kinds of investors — helping you make the right choices for where to put your money for both the best returns as well as the lowest fees.  Other online options exist to also help you make good investment choices.

NewRetirement Planner

Do it yourself retirement planning: easy, comprehensive, reliable

NewRetirement Planner

Take financial wellness into your own hands and do it yourself retirement planning: easy, comprehensive, reliable.

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