Make Sure You Know What Fees You are Paying
High fees can eat away your retirement savings, make sure you know what you’re paying.
Many people don’t know how much they are paying for their retirement saving plan. Unfortunately, it’s all too common that people are paying high fees. Make sure you know what you’re paying, this will help make sure you’re on track to meet your goals. You can find the fees you are paying on your account statement.
As time passes, fees begin to eat into the value of your account, which lessens the money you’ll have in your retirement. There are two main problems with fees:
- Fee information is often obscure and difficult to understand
- Fees are often too high
Here are the types of fees commonly associated with a retirement savings plan:
Administration and custodial fees
These are costs associated with the day-to-day running of your retirement plan. This includes record keeping, accounting, online access, and customer service. Administration fees are often charged by the financial company that manages your plan investments, or by a plan provider.
Fund Management fees
These fees can sometimes be the most expensive fees you’ll pay for your retirement plan. This is the fee paid to the company managing your investments. The average fund management fee is 0.78%
You may also be charged individual fees for optional services such as hardship withdrawals and loans from your retirement savings account.
Compare Investments Fees
One of the problems with comparing fees is that the percentages appear to be small often ranging from 0.25% to 1.0% and 1.3%. But these small numbers make a huge impact on your total savings.
The example below shows how much you could pay in fees over a lifetime of savings.
** All figures in 2012 dollars. Workers are assumed to begin saving at age 25 and retire at age 67. Example reflects median salary of $30,502 when worker starts saving at age 25. Example provided by CAP.