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Do You Know How Much You Are Paying in Fund Fees?

Do You Know How Much You Are Paying in Fund Fees?

(Dollar Photo Club)

By    |   Tuesday, 20 December 2016 09:04 PM

For many people, retirement is visualized as the most relaxing time in life. They have spent their entire life working to build a nest egg for retirement.

Retirement is the time to enjoy their golden years without any worries.

Unfortunately, this is not always the case. Pre-retirees and retirees have many concerns when it comes to their retirement, and running out of money is arguably the biggest of those concerns.

Twenty years ago, nearly 80% of American workers received a pension from their employer. According to the U.S. Bureau of Labor Statistics, today, less than 20% of American workers will have a pension when they retire. This change means it is primarily the employee’s responsibility to create a retirement income that will last throughout their entire life. Many do this with qualified plans from work, the most popular being 401(k)s.

They contribute to this plan throughout their working years, and hope that when they retire, this nest egg will last the duration of their lifetime. The problem is that many people with qualified accounts, or money in the stock market, are unaware that they may be paying unnecessary, excessive fees. These fees can add up very quickly. We feel that it is important for pre-retirees and retirees to be educated on their investments, and understand exactly what they are paying in fees.

In 2012, the Department of Labor released final regulations that make it easier for employees to know what they are paying in fees on their Participant-Directed Plans.

Before, it was more difficult for employees to know what they were paying on these accounts since information was not always readily available. We believe it is important to know exactly how much you are paying so you can eliminate unnecessary fees.

There are three types of mutual fund fees that you need to understand: Loads, Fund Expenses & Turnover Ratio.

  • Loads: Loads can be associated with A, B, or C mutual fund share classes. An A share charges a load upfront, every time you put money into the mutual fund. B & C shares charge a back-end load, meaning if you withdraw funds within a certain year, a fee will be charged to get out of the fund.
  • Fund Expenses: These are fees that Mutual Fund companies charge you for managing your money.
  • Turnover Ratio: Let’s say you are in a mutual fund composed of 250 different stocks. Turnover is how often the money manager is turning over, or selling those 250 stocks and buying new ones within a year.

These three types of fees can be very costly, and reduce the overall value of your portfolio.

If you are looking for the optimal retirement game plan, it is very important to be aware of the fees you are paying on your accounts.

Fees may not be a big concern when you are working and putting money away for retirement, but they can add up and make a significant impact over the course of time.

By finding out what you are paying fees, you will gain clarity and confidence in your retirement game plan. With that, your retirement years will be as relaxing as you have always dreamed they would be.

 

Chad Slagle, an Investment Advisor Representative, is president of Slagle Financial, LLC. Slagle is a graduate of Illinois College, where he earned a bachelor’s degree in sociology. He founded Slagle Financial in 1995 and began his career by working with retirees, advising them on their insurance needs and long-term care needs. Today, Slagle Financial offers a full range of financial products and services to assist clients with tax planning strategies, retirement planning and estate conservation.

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Fees may not be a big concern when you are working and putting money away for retirement, but they can add up and make a significant impact over the course of time.
invest, funds, fee, pay
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2016-04-20
Tuesday, 20 December 2016 09:04 PM
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