This is not a joke, if you are paying high investment fees over a long period of time, up to half of your money will go towards fees!
This actually scared the shit out of me (and I thought I was pretty good with numbers…) so just let me be very clear with what I mean and how you can make massive changes very easily.
The impact of high investment fees on your pension over (long) time
Most of us save for our retirement in one way or another and quite commonly via our employer. Regardless if we save a little or a lot, the implications of high fees are very severe. Your retirement savings might actually be cut in HALF based on what level of fees you are paying on your investments. I know this sounds absurd and utterly insane and I bet you are thinking that this can’t be true! Well, stay with me for a few more moments and I will show you just how real this is.
Assumptions: You have 25,000 USD in your pension pot today and then you contribute another 1,000 USD per month (by yourself or via your employer) over 30 years. The money grows with 8% per year, which is around the long-term average of the stock market. Thirty years might seem like a very long time but remember that many of us will live much longer than we think. So even if you are 50-years old, you hopefully have another 30 years to go. Let’s make sure you make the most of them AND have the finances to do so by not giving it away in investment fees!
Below you can see an example showing that almost half of your pension pot is eaten up by investment fees if they amount to a total of 3% per year.
Almost half of YOUR money gone in fees! Imagine if you had a twin brother or sister and you invested the same amount, you both accomplished the same 8% return per year but one of you paid 3% more in different fees every year. The one with the lower fees would have 766,000 USD more in their pension pot!
Put in a different way, the one who paid the lower fees would have a pension that is almost twice as high (1,7 million USD versus 900,000 USD), absolutely outrageous!
I don’t know about you, but to me it doesn’t make sense to pay these kinds of investment fees when there are other alternatives (normally very comparable) readily available!
Make sure you know how much you are paying for your investments (all of them), then check if there are any similar investments (like ETFs) but with much lower fees, like the ones from Vanguard which Warren Buffett often recommends.
If you want to know more I recommend you to go through my free sessions under the Wealth Section. You can also type in your numbers here and see for yourself what your fees are doing to your investments.
Knowledge is only potential power. When you actually apply your knowledge, that’s when you have power to change!
This is not financial advice, I am only making you aware of what you should pay very careful attention to! So make sure you go through your numbers and in particular all the investment fees you are paying so that you are aware. Do this on your own or ask someone you know who understands investments (who has money) and then discuss it with your financial fiduciary but make sure you keep your costs at a bare minimum!
Actions to take:
- Know what you pay and make sure you pay as little as possible!
This is daylight robbery, please make sure you are not one of the affected ones!