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.
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.
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Copyright 2017 The Kiplinger Washington Editors