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Keep fees in check to protect your retirement savings

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 Michelle Blog PhotoThe impact of fees over time on your retirement account can significantly reduce your nest egg. It literally pays to understand the fees associated with retirement savings accounts, because keeping those fees low means more of your money is working for you. Below are ways that fees quickly eat away at your account balance.

Higher fees = Longer time to save. Even an increase of one percentage point in fees means you have to save for a longer period of time. In the 2011 May and August issues of the Journal of Financial Planning, researchers found that when a 1% fee was applied to an account, the amount a person needs to save during their working career to meet their retirement expenses increased from 16.62% to 22.15%.

Higher fees = Less to spend. That small fee increase also affects the amount you can withdraw. The same research found that “with a 60% bond/40% stock asset allocation, a 1% account fee would, on average, result in a 0.63% point reduction in the maximum withdrawal rate, which represents an average reduction in retiree annual spending power of 11%.”

Higher fees = You'll run out of money sooner. Fees may cause your savings to disappear sooner than you expected. According to David Blanchett, a Director at Unified Trust Company, a 1% advisory fee plus 0.50% in fund expenses (total annual fee of 1.50%) increases the chances that an account will be depleted early from 5% to 13%. (This is assumes a 60% bond/40% stock asset allocation and 4% in annual withdrawals.)

So, as you consider which retirement account to use as you plan for your future, be sure to pay attention to all of the costs. Not all providers charge the same fees. (For a list of common fees charged to retirement accounts, see our article, "Fees matter.")

Our fees are simple. The WEA TSA Trust is a low-cost, high-quality 403(b) tax-sheltered annuity provider.  We also offer both Roth and Traditional IRAs. With each, we charge one low annual administrative fee with an annual cap. (Mutual fund management and redemption fees apply.)

It is also worth noting that your family members, including your spouse, children and their spouses, parents, and parents-in-law may also be able to reduce costs associated with various retirement accounts by opening or rolling over into our IRA program. Give us a call at 1-800-279-4030 or email for more information. Wisconsin residency required.

Michelle Slawny, CFP®  

(Source: Journal of Financial Planning, May 2011, August 2011.) This blog post is for informational purposes only and not intended to be legal or tax advice. Consult your tax advisor or attorney before taking any action. The 403(b) retirement program is offered by the WEA TSA Trust. TSA program securities offered through WEA Investment Services, Inc., member FINRA.  The Trustee Custodian for the WEAC IRA accounts is Newport Trust Company.