This piece is part of my 2016–2026 archive migration. Some original formatting, content, and external links may be missing, changed, or not be optimized.
Check the fees of your 401k, IRA, brokerage accounts, and the rest of it!
Okay, okay, I’m not saying all financial advisors and financial firms are out to get you with sinister and evil capitalistic intentions, but I am encouraging you to be vigilant.
The 401k and retirement planning industry is lucrative – especially for uninformed investors.
“As with anything you buy, there are fees and costs associated with investment products and services.
These fees may seem small, but they can significantly impact your investment portfolio over time.
Understanding the fees you pay is important to investing wisely.
The following chart shows an investment portfolio with a 4% annual return over 20 years when the investment either has an ongoing fee of 0.25%, 0.50%, or 1%.”
Source: Investor.gov
Unfortunately, not all financial advisors try to “financially” advise you. Instead, they’re trying to pad their pockets with your investment.
I recall finally pulling my funds out of an actively managed firm; it was one of the best decisions of my life. They were constantly “rebalancing” my portfolio (which is frequently code for more tax implications and more fees that go into their pockets). I’m not going to say the returns weren’t nice. But you always must subtract the fees from the performance; that’s the actual performance.
No need to get fearful, frustrated, or upset that there are some crooked folks in the financial industry. Instead, just be more intelligent than them and vigilantly question the fees you’re being charged to hold your money in one of their accounts.
The fee structure you desire is entirely up to your preference.
The Best Fee
The best fee is the one that’s closest to 0%. But financial advisors have to make money, too, right?
Above, we can see that having a fee lower than 1% is best. Look at the person’s savings with an annual fee of 0.25% in place.
Now, imagine how much more that person would have if their annual fee were 0.025%; low rates aren’t readily advertised, so you must research.
With the oncoming slaught of passively managed portfolios, fees are becoming less, but some fee structures of passive portfolios are becoming more complex, and the fees can be harder to find.
An example of complex and hidden fees: There is a firm that makes it extremely difficult to find the fees; they also don’t list their fees out; the fees are dependent on the deal or set of investments you choose.
Several places are destroying people’s eggs due to high fees and complex fee structures. The only way to know what you’re paying for is to audit your accounts and look at the fine print.
Secondly, do your research.
Actively managed funds aren’t necessarily better than passively managed funds. The S&P500 index has outperformed many actively managed funds, and the fees are also significantly lower.
Let’s Remember This, Though
A person who invests with a firm that offers high fees is still better off than someone who never invests a single dollar.
But for the consistent investor, you want to ensure your money proliferates without vultures coming in to decrease the growth rate.
Choose your investment pots prudently.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.