Hidden Fees Costing You Half of Your Retirement
By Dale Gillham |
I’m sure many of you would have heard the term you get what you pay for. Another way of saying this is that you get what you put in.
All too often, those starting out in the market are looking for the cheapest product they can find to achieve their financial goals. In fact, many times I get asked where they can find something for free.
But you need to ask yourself, what kind of motivation does a person who wants something on the cheap or for free have, and more importantly what do you think their chance of success will be?
But that is not the topic for today, instead I want to chat to you about how hidden fees are costing you half of your retirement.
What hidden fees are costing you half of your retirement?
It is no lie that there are hidden costs and expenses in the stock market that you need to be aware of. Whether it’s brokerage fees, managed account fees, entry or exit fees to name a few.
If you are not aware of what you are paying, chances are you will be charged more than you realize.
There has been a lot of talk recently around bank customers being charged hidden fees, as well as other other financial service providers such as insurance providers doing similar things. Some customers are even charged for services they did not ask for.
If this has happened to you, in some instances you will find that you have actually agreed to pay the fees without knowing it because you did not check the fine print or read one of the many emails you received advising you of the charges being added or increased.
Earlier this year, I wrote an article for a leading money magazine about retirement savings for millennial's. If you want to read the article, click here.
What I shared with readers was what the difference on 1 percent in fees in your superannuation account can do to your bottom line.
In short, it could cost you half of your money come retirement. Yes you heard that right, half.
The sad reality is that most people are paying too much in servicing fees, worse still is that they are not doing anything about it.
Now you cannot tell me that you don’t care about paying more fees. Because I think most people do.
Maybe we lack action because we are not sure what to do or we deem it too hard or too big an effort to try to tackle the bank.
When you look at the bigger picture over decades and you realize that extra fees can be half of your entire life’s savings, isn’t it worth spending a little time ensuring you’re getting the best deal possible?
Look at it this way: it is not just a few dollars per month, but thousands in the final years of growing your retirement savings.
The same thing applies for the stock market and investing in general. Investors often over pay for services such as brokers who often provide them with average advice and at times mediocre investments.
What you can do to avoid hidden fees
In most cases people with just a little bit of knowledge can do better themselves than getting stock tips from brokers. So why would you pay extra for no added value?
Investors are far better off learning a few simple rules around buying and selling and using an online broker who processes the trades and does so more cheaply.
Again you do pay for what you get, so you need to ensure you are getting value for the services you use. Sometimes, all it takes is a little common sense and some effort and you can easily reap the rewards.
Often I find those new to the market are paying for services they don’t need and sometimes their bills can run into hundreds and thousands of dollars per year.
Areas you need to look at where costs can blow out or are unnecessary, include broker commissions, management or custody fees and charges, acquisition costs and platform fees.
You also need to consider the hidden costs, such as what are promoted services that offer free brokerage. Remember nothing in the financial world is free.
Fees are hidden in the bid-ask spread, there are also transaction costs hidden within underlying funds such as ETFs.
Whether you are an investor or trader you will pay fees and you need to know what they are, as extra fees will eat into your profits and these extra fees affect the compounding of your capital.
It is important to remember that everyone in the financial services industry wants to get some of your money and it is your job to ensure you get value for your money.