How a 1% Investment Fee Can Wreck Your Retirement

Resources In this Video

Tools & Resources

0:00 How investment fees affect your wealth
1:45 How 1% in fees can cost you $1 million
7:17 High fees don't generate better returns
10:04 How to find a mutual fund's expense ratio
14:05 Free investment fee analyzer
16:30 Investment fees and the 4% rule

Investment fees are easy to ignore. The expense ratio on a mutual fund or an advisor's fee comes out of your investments. They don't send you a bill. Yet even a 1% fee can cost hundreds of thousands of dollars, or more, over a lifetime. In this video we walk through just how destructive even small fees can be to your wealth. Then we look at whether high fees generate better returns (they don't). Next we'll cover how to determine the expense ratio of a mutual fund. And finally, I show you a free tool you can use to analyze the expenses of your investments.

ABOUT ME

While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.

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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.

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[WeekendGamerTX]

Your channel is severely underrated. I hope you gain more subscribers.

[ericjuli]

I need to show to the finance guy at work. He thought I was off my rocker for taking a Coronavirus Related Distriubtion from our 401k only to sock it back into a Vanguard IRA. Went from 1.14% ER to %0.16-ish!

[el-hplj]

I set up 3 variable annuities in 2020 and they're invested in mutual funds. When I set these up 3 years ago I didn't know anything. And I think the salesman took me for a ride. I have 3 separate accounts each one with about They have done decent since 2020. Each account portfolio has about 4 or 5 different mutual accounts all ranging from .60 to 1.2. In exp ratio. Are all these fees in a single portfolio added together??? I feel like fees are holding back growth. Im 43 and looking for growth but i am a little scared to lose money. in 1 portfolio i have. Growth fund, blend fund, high yeild bond, government bond. Should I transfer shares and eliminate funds? Would that reduces fees?

[MrMaxamillion]

Great video, about a year ago I left Edward Jones and moved my investments to Vanguard. Edward Jones did not disclose the fees on the statements and when I met with my advisor ashed she just blow my question off and kept on trying to sell me her insurance product. She was no financial advisor just a salesperson trying to increase her bottom end. You are always going to have fees unless you are going to do it yourself, but some of the fees are outrageous.

[HydrogenHealth]

What is your opinion of Raymond James? All of my retirement accounts are managed by them. Your video has scared me a little but also opened my eyes, Thank you!

[rbarr]

Learn logarithms! That might sound smug or arrogant; logs are easy to learn and will show you the truth! Example: Fischer wanted 1.5% per year to serve as my financial advisor (because my portfolio is less than 1/2 million). It took me about 30 seconds to calculate that those fees would consume ONE QUARTER of my original nest egg in just under 14 years. Compounding can eat you alive!

[poolmilethirty]

Rob, Are you suggesting that it's not worth getting a certified financial planner as you're nearing retirement? The one I'm looking at will charge 1.5% of the AUM

[abu]

Is the MER (of etf) charged full or prorated? If i own an ETF for few months (or weeks even) then i exit, will i pay the fee fully for a year or will it be charged pro rated for the months/weeks i held the etf?

[scottfritz]

Perfect timing, Rob! I will be able to use your calculator in my presentation at work which I hope will really drive home the idea that fees matter inside 403b accounts for teachers. Thank you for all you do to shed light on these important financial concepts.

[charliewynn]

Thanks! This is exactly the video I needed to leave our family friend advisor!

[calbob]

1% management fee x $1, 000, 000x ten years=$100, 000. That twice a year meeting with free coffee isn’t worth it?

[newbeginnings]

Rob, I pay $500 a year to my iRA fees. I want to switch to self managed Roth to M1 finance! I have no clue what to do! Should I contact a financial advisor?

[walking_introvert]

My 401k is super deceitful. They have taken the fund sheet and put their logo on it and removed any expense ratios. Equitable is a horrible company apparently. Super huge expenses on the Fee sheet shows up to 2.72% for the highest with 2.02% being the lowest option. I had no idea. And good luck finding the actual ticker symbol the way they generalize the name. Multimanager Technology is one of the funds. That is it.

[catherinedesilets]

My accountant referred me to a financial manager who suggested to put me in basically 4 ETF & charges 1.8% annual fee on top !!!

[pedrogarces]

Great video! Indexing is the way to go with the 3 fund portfolio. Thank you for the tools recommended

[jdblewitt]

Thanks for the video. My wife and I have several non-employer-sponsored retirement accounts (ROTH and Traditional) managed under Vanguard Personal Advisor Services. It's a .3% fee, which is on the low end and I like that they invest in their own funds which have relatively low fees. To save on the .3% fee, what are your thoughts on opening duplicate accounts outside of management, transferring the bulk of the funds there, and just mirroring the funds and rebalancing that Vanguard does in the managed accounts?

I assume you could do this with any advisor where you have a small portion of your overall investments managed, and just use them to duplicate their efforts in your unmanaged accounts. This way, you could have the benefit of an advisor to strategize with, but then use it as a template on accounts with no management fees?

Or, is it simple enough to use free info online to figure out what your allocation should be based on your goals and rebalance yourself, which would be exactly what your advisors would be doing anyway?

[rickdunn]

For illustrative purpose on the effect of fees these numbers are fine. But in reality, it's worse. Why? Because people tend to have some fixed income, cash and other investments. The Advisors are getting the AUM fee for managing cash? Also one should expect lower returns due to sequence of return risk. The point of this video, however, is very important, I would say "Critical". My rule: "Money Doesn't Grow on Fees".

[katsadventures]

Oh boy, this is so upsetting for me. I have a little bit of money $366, 000 and my bank takes 1.78% from me. 😢😢😢

[ltgemini]

Im sad that I'm only just realizing how much money ive paid over the years. I took set it and forget it to heart.

As of today, i was considering having Fidelity actively manage a rollover 401k of 200k at 1.16 paid in part quarterly?

Its currently moved/sitting in my current/new 401k.

This video says this a bad idea. Is there a flat rate investment firm that i should consider ?

[reacts]

High Rob @Rob Berger
In my country, we have 1% fee for the index fund!
Do I pick stocks, by the way i am not professional, or should I buy this expensive passive investment? What is your take?
Thanks