Personal Finance Blog for Retirement and Investment Advice

How Hidden Fees Are Sabotaging Your Retirement Plan

In my first blog about costly retirement planning traps, I explained how conventional retirement plans put you in jeopardy of losing money you absolutely cannot afford to lose. Just because all the other lemmings choose to dive over the cliff, doesn’t mean you have to!

Now let’s look at the gremlins of conventional retirement plans that are decimating the nest egg you’re trying to build: FEES.

Do you even know how much you’re paying in fees each year for your retirement account? If you’re like most Americans, you don’t have a clue. The Employee Benefit Research Institute found that only half of 401(k) plan participants even noticed the fee information stuffed in the 14-page disclosure (that requires a magnifying glass to read and 3 years of law school to understand).

And almost no one makes any changes to their plan if they do read the fee disclosures.

Most folks just don’t think fees are all that important. Or, they think they’re unavoidable – sort of like death and taxes.

Wrong on both counts!

The growth you’re banking on to fund your retirement is reduced – often drastically – each year by the fees you pay. You pay these fees whether your account does well or it tanks. The impact of these fees is much greater than most people realize.

The Securities and Exchange Commission reminds us that “all mutual funds have costs that lower your investment returns.” And that includes target date funds and so-called no-load funds. No-load funds don’t have a sales fee, but they can have all the other fees.

But how bad can these fees really be?

Let’s say you’re going to grow your money in the market for 35 years and over that time, you get a 7% return. How much of your account value will be eaten up by fees?

Well, I hope you’re still sitting down, because according to the Department of Labor, fees of only 1% per year can slash the value of your savings by 28% over the next 35 years.

Don’t think you’re paying at least 1%? Think again!

On average, if you’re in a small 401(k) plan, you’re paying 1.9% in fees every year. The average fee for a large plan is 1.08% per year.

Which means almost every 401(k) participant is losing at least one fourth of their retirement account’s total value over 35 years

And for too many, it’s even worse.

What about those target date funds, the default option many employers automatically put participants’ money into these days? We researched the four largest, most popular target date funds and found that all but one of them have fees so high they will devour 20% or more of your savings over 30 years.

And IRAs can be even worse! According to the U.S. General Accountability Office, some of the largest IRA providers charge as much as 1½% every year. And many were caught red handed lying about the fees to those inquiring about rolling over their 401(k) plan into an IRA.

Part of the problem is compounding: Compound interest is a thing of beauty – when it’s working for you – but compound fees are really ugly!

Most of us don’t think about compound fees. Every time a fee is deducted from your account, it decreases your balance, and the next time a fee is deducted, it’s going to decrease your balance again. It all adds up to devouring more of your wealth over time.

What’s worse than a compound fee? A compound fee they don’t tell you about. Wall Street became so sneaky with their fees that the government decided to step in. In 2012, the government announced new rules requiring 401(k) plans to disclose the fees you’re forced to pay.

So now you get a disclosure form in tiny print legalese that can run a dozen pages or more. But it still doesn’t give you an easy-to-read summary that says, “You’re paying this much in fees, and here’s how that compares to other plans.”

How come the government can put a simple cost comparison on your washing machine, but not on your 401(k)?

We also researched several very popular index funds. That’s the type of fund that passively tracks a particular stock market index. They should have low fees, right? After all, it’s not rocket science to track an index.

But those fees can also really add up. In fact, in one very popular and widely-held fund, on a $100,000 investment held for 30 years, you’ll lose almost 23%, thanks to those so-called “nominal” fees. Another popular index fund will devour more than 37% of your money in 30 years! Someone’s getting rich here, but it’s not you!

Is that enough motivation to look into the fees you’re paying? You can minimize the fees you pay by doing a little research.

FINRA is the Financial Industry Regulatory Authority, and it’s the organization authorized by Congress to protect America’s investors. Buried deep in the FINRA website is a marvelous free tool called the FINRA Fund Analyzer that you can use to quickly and easily analyze the costs of almost any mutual fund or exchange traded fund you care to investigate.

TIP: Ideally, you should not be paying more than a quarter of a percent per year in fees. If you’re paying more, ask your employer’s administrator to switch you into a lower fee fund.

Better yet, check out Bank On Yourself for your retirement plan. With Bank On Yourself, all fees and costs have already been taken into account in the bottom-line results you are guaranteed to receive – before you even begin your plan. No nasty surprises, no unexpected gremlins chomping away at your precious retirement fund!

Learn More about the Bank On Yourself method

All the details about the Bank On Yourself method are available in a FREE Report, 5 Simple Steps to Bypass Wall Street, Fire Your Banker, and Take Control of Your Financial Future.

Download your Report for FREE here.


The Movie You MUST See If Your Money is in the Market

You probably already know – or at least strongly suspect – that Wall Street is rigged. And not in favor of the little guys and gals like us.

But this blog post should lay any doubt about that to rest…

Let’s start with the movie you must see if you have any money invested in the market (or need a reminder of why you yanked it out in the first place).

The Big Short is based on the New York Times best seller by Michael Lewis. The main characters are played by Brad Pitt, Ryan Gosling and Steve Carell.

the-big-shortIt recounts the story of a handful of Wall Street traders who (ultimately) made a fortune by betting against the mortgages that caused the housing bubble… and subsequent crash and Great Recession. [Read more…]

Retirement Planning that Helps You Sleep at Night

Let me be blunt. If you’re like the vast majority of Americans, your retirement plan is about as good as the survival plan of that last lemming heading over the cliff!

For most of us, our “retirement planning” has been manipulated by our employers, Wall Street, and celebrity talking heads – all of whom have their own agendas that don’t seem to prioritize our financial security and well-being. And the vast majority of personal financial advisors have chosen to stick with conventional strategies without even questioning the less-than-stellar results they’ve given us over the years.

Risk, a four-letter word?When a “plan” proves that it isn’t getting the results it’s supposed to produce, doesn’t it make sense to come up with a different plan? (The answer is “Yes!”)

Over the next several blog posts, I’ll illustrate specifically how and why your conventional retirement plan is failing you and changes you can make that will let you build a retirement savings fund that is safe and secure – guaranteed.

Let’s start with the problems of conventional retirement plans. I know of at least six major pitfalls and traps and I’ll cover each one in detail. The first painful trap is RISK. [Read more…]

Why you need Dow 35,000 today

I have an important question to ask you…

When do you think the Dow will hit 35,000?”

Does that seem like a crazy or dumb question? After all, the Dow closed 2015 at only 17,425. It would have to more than double to get to 35,000. But it’s not a dumb question. I’ll explain why in a moment.

For the last five years, we’ve been tracking the Dow Jones Industrial Average and what that number means to you in your real life.

Sure, the Dow has gone up and down, and it’s gone up more than it’s gone down. But is it up enough to actually give you a return that justifies after all the sleepless nights and stomach-churning highs and lows?

Then there’s inflation. Has the market, as measured by the Dow Jones Industrials, even kept up with inflation? [Read more…]

Wealth Beyond Wall Street: Retirement Planning Solution or Scam?

Have you been hearing radio ads for something called Wealth Beyond Wall Street offering a free book if you call a toll-free number?

The promise sounds enticing: Use an index strategy to share in the upside of the stock market with no downside risk. If you’re wondering what that’s all about, I’m going to spill the beans in this review.

Wealth Beyond Wall Street is the brain child of marketer Brett Kitchen, and Ethan Kap, a financial advisor. They typically appear together in pictures dressed in black suits and black sunglasses, standing next to a classic Mustang. (Reminds me of the Blues Brothers every time I see it.)

Before Wealth Beyond Wall Street, they called it Safe Money Millionaire and the 101 Plan.

When you call their toll-free number to take advantage of their free book offer, you’ll also be offered a free consultation or “blueprint” from one of their advisors. [Read more…]

Has the Risk You’ve Taken in the Stock Market Since 2000 Been Worth It?

Take a quick guess – what do you think the average annual return of the S&P 500 Index has been since the start of the century almost 16 years ago?

Especially in light of the recent bull market, one of the biggest in history.

So what percent do you think the index has grown on average each year? Maybe 4%? 8%? 12%?

C’mon – humor me and take your best guess…

Okay… so over the last nearly 16 years, since January 1, 2000, the S&P 500 (which represents the broad market) has had an average growth rate of only 1.96% per year. [Read more…]

President Reagan’s Secret 702(j) Retirement Plan – What it Is and How it Works

The Palm Beach Letter is at it again! And that’s why we’ve been getting questions about “President Reagan’s Secret 702(j) Retirement Plan,” and how it compares to Bank On Yourself.

The 702(j) account has gone by other names, including the 770 Account, President’s Secret Account, Invisible Account and Income for Life.

First let me reveal exactly what the 702(j) Retirement Plan is, and then I’ll tell you what they got right… and what they got wrong.

The 702(j) Retirement Plan is yet another name that the Palm Beach Group gave to the Bank On Yourself method, which relies on a super-charged variation of an asset that’s never had a losing year in it’s 160+ year history. [Read more…]

6 Costly Retirement Plan Traps and How to Avoid Them

If you’re like most people I talk to, you’re making several critical mistakes with your retirement accounts.

These mistakes could cost you literally hundreds of thousands of dollars over your lifetime.

But what’s worse is how these retirement plan traps can cost you your family’s well-being, and mean the difference between having to struggle to get by during what should be your golden years … and being able to enjoy life’s luxuries.

With all the economic uncertainties and worldwide turmoil that have been churning the markets, it is vitally important that you know how to avoid these costly retirement plan pitfalls today.

That’s why I’m urging you to join me and our Director of Education, Lee McIntyre, for this special online event. You’ll discover which retirement plan mistakes you are making and how to avoid them.

Space on this online event is limited, and there is no cost to attend.

Here’s What You’ll Discover During This Online Event…

[Read more…]

Vacations are for People, NOT Your Retirement Plan

Do you remember how much value the stock market lost in the crashes of 2000 and 2007? I’m talking about what percent the market lost during each of those crashes.

If you’re not sure, take a guess before you read on.

The tech crash happened just 15 years ago. The S&P 500 lost 49% from March, 2000 to October, 2002. Many investors – myself included – had moved their money into NASDAQ tech stocks, which plunged 78% during that same 2-1/2-year period.

Then the S&P 500 peaked again in 2007 – just a few years later. By March of 2009, it had plunged 57%.

That makes two heart-stopping losses of more than 49% just in the last 15 years. [Read more…]