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When it comes to building a secure retirement, every dollar counts. You diligently save, invest, and plan, but one factor that can quietly sabotage your efforts is often overlooked: fees. These seemingly small percentages can snowball over time, eating away at the wealth you’ve worked so hard to accumulate. Let’s dive into how fees can erode your retirement savings and what you can do to protect your financial future. The Hidden Impact of Fees At first glance, a 1% annual fee on your investment portfolio might not seem like a big deal. After all, what’s one percent? But consider this: over a 30-year period, that 1% can cost you hundreds of thousands of dollars in lost growth. Here’s why: Compounding: When fees are deducted, they’re not just taking money out of your account today. They’re also reducing the amount that could have grown through compound interest over decades. Market Gains Diminished: Even in strong market years, a significant portion of your returns is redirected to fees instead of your account. For example, if you start with $500,000 in your retirement account, earn an average annual return of 7%, and pay a 1% fee, you could lose nearly $200,000 to fees over 30 years. That’s a staggering amount for a single percentage point. Types of Fees to Watch For Expense Ratios on Mutual Funds and ETFs Many mutual funds charge annual management fees called expense ratios. While actively managed funds often charge higher fees, low-cost index funds or ETFs typically offer a more affordable alternative. Financial Advisor Fees Some advisors charge fees based on a percentage of assets under management (AUM), which can add up as your portfolio grows. For instance, a 1% AUM fee on a $1 million portfolio equals $10,000 annually—money that could be reinvested. Trading Costs If your portfolio involves frequent buying and selling of assets, trading commissions can erode your returns. This is especially relevant if you work with advisors who engage in active management. Account Maintenance Fees Some retirement accounts, like IRAs or 401(k)s, charge annual maintenance fees. While these may seem minor, they’re worth scrutinizing. Hidden Costs Certain costs, like 12b-1 fees or sales loads on mutual funds, are buried in fine print. These fees often go unnoticed but can significantly affect your returns. The True Cost of “Small” Fees To understand the impact, consider two investors: Investor A pays 1% in annual fees. Over 30 years, their $500,000 portfolio grows to $3.2 million. Investor B pays just 0.25% in fees. Over the same period, their portfolio grows to $4 million. That’s an $800,000 difference—not because of poor investing choices, but because of fees. What You Can Do to Minimize Fees Understand What You’re Paying Start by reviewing your account statements and prospectuses to identify all the fees you’re paying. Use online fee calculators to see how much they’re costing you over time. Choose Low-Cost Investments Opt for low-cost index funds or ETFs, which typically have expense ratios below 0.10%. These funds track the market instead of trying to beat it, which often results in lower fees and better long-term performance. Work with Transparent Advisors Seek out financial advisors who offer transparent, flat-fee or hourly pricing instead of AUM fees. This way, you’re paying for their expertise without sacrificing a percentage of your wealth every year. Monitor Account Costs If your retirement accounts charge maintenance fees, look into transferring to providers with no-fee or low-fee options. Consolidate Accounts Having multiple accounts spread across different firms can lead to overlapping fees. Consider consolidating to reduce complexity and costs. The Unbound Capital Approach At Unbound Capital, we’re on a mission to help you keep more of what you’ve earned. We don’t charge AUM fees or commissions, so our advice is always aligned with your best interests. By focusing on transparency and low-cost strategies, we help ensure that fees don’t stand in the way of your financial independence.