
Are High Fees Undermining Your Retirement Savings?
April 28th, 2016 by Anchor Bay Capital's Investment Team“Where there is no loss, the gain is obvious.”
This is a variation of an old Chinese proverb with a very simple concept. Basically, what you don’t lose you get to keep! You may not know it, but a big way you may be losing money right now is the fees within your 401k.
As we review client accounts on a regular basis, we often discuss the options for investing within a company retirement plan. The majority of the time, we find that clients are unaware of the costs associated with the investments they choose within their plan. Finding out your cost is a key step before entering into any investment, and when projecting out the costs over a lifetime of saving for retirement, the amount lost can be tremendous. In order to keep all that you can, there are two core principles that we follow at Anchor Bay Capital when investing for the future:
- Put your money in many markets and stay there for the long haul.
- Pay little or nothing to acquire, hold and liquidate your investments.
So how can you avoid high fees in your 401k? It starts with reviewing the internal costs of each investment option. This information is accessible to you through your plan’s website or summary booklet. Look at each asset category such as U.S. stocks, International Stocks, Bonds, etc. You should typically pick the least expensive option in the asset category as you build a diversified portfolio. What is expensive? It depends on the type of fund, but typically an index fund should have an internal expense of less than .25%.
What can you do if you don’t have the best options within your 401k? Invest enough in your plan to get the company match. This is essentially a 100% return on your investment, so you should take advantage of it. Once you have invested enough to get your match, you may want to look at investing outside of your plan. A Roth IRA may be an option. This type of account can complement your 401k savings in retirement by providing income that is tax-free. You may also want to bring the issue up with your company. If they become aware of your concern, you may be able to be a catalyst in changing your company plan for the better! Every little bit helps!
If you are unsure where to start, or it just doesn’t make your priority list, you can also hire us! At Anchor Bay Capital, we can conduct a complete review of your current plan regardless of where you work and if needed, help you construct a portfolio built around lower-cost solutions. We also can review other components of your portfolio as well. The goal is to provide you with an action plan for how to approach financial decisions and achieve the most important milestones in your life. The planning is fully customized to your needs and updated as your life changes.
Curious whether your portfolio is being hampered by high fees? Reach out to us anytime for a free portfolio review.