4 Sneaky Fees That Can Chip Away at Your Retirement — How To Track and Mitigate Them

Retirement account fees don’t typically arrive as a bill. Some are taken out of your investments or spread across different parts of your plan, which can make them easy to overlook. Reviewing your statements and investment choices can help you see what you’re paying and decide whether the cost is worth it.

Here are four types of fees to look out for.

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1. Fund Fees That Come Out of Your Investment Returns

Mutual funds and exchange traded funds (ETFs) charge fees called expense ratios, according to David Kassir, managing director of private wealth management at Manna Wealth Management. “It is a percentage of what you have invested, taken out before you ever see your return,” he said.

While most funds will have these fees as just part of operating, investors can compare the costs of similar funds and consider which options work better.

"None of these fees are automatically bad. They can be completely valid if there's real service or personal time being invested on your behalf. The problem is when they go unnoticed,” explained Ernie Wingard, financial advisor at Capital Choice Financial Group.

2. 401(k) Plan Fees That Pay for Running the Account

A workplace retirement plan may charge administrative or record-keeping fees for services such as maintaining the plan and providing statements, Kassir explained. The employer may cover those costs or some of them may be passed on to employees.

“If you ever leave the 401(k), you're almost certainly going to be responsible for those administrative costs,” Wingard said.

3. Advice and Managed Account Fees

If you pay someone to manage your investments or provide financial advice, that charge may be separate from the fees charged by the funds in your account, Kassir said. Consider what service you receive for the cost and whether you still use it.

These aren’t all bad. “They can be completely valid if there's real service or personal time being invested on your behalf,” Wingard said.

4. Transaction and Account Fees

You may also pay fees when you make certain transactions or maintain an account. “In an IRA, watch the small stuff. Custodial fees, transaction charges [and] transfer-out fees when you leave,” Kassir said.

Small numbers add up, he said.

Where Can You Find These Fees?

For a 401(k), look for the annual fee disclosure and plan documents in your online retirement account. To see what a particular fund charges, check its fact sheet or prospectus, Wingard said.

“You'll see what type of fund it is and how they charge their fees. Beyond that, there's a plan document you can research for any other underlying fees you might not be aware of.”

If you have an IRA, review your account statement and agreement along with the documents for each fund.

How Can Fees Affect Your Savings Over Time?

Fees are unavoidable entirely, but they can reduce the money you keep invested, which can affect how much it grows over the years. Choosing funds that have industry standard or customary fees is wise unless there’s a special value that accompanies a higher fee.

Can You Lower Fees Without Moving Your Money?

Compare funds that serve a similar purpose and see whether your plan offers a lower-cost option, Wingard advised. Also check whether you’re paying for a managed account or another service you no longer use. A lower fee is not automatically a better choice if it changes your investment mix or removes advice you value.

“If one [fund] is more expensive and there's no added value for it, pick the cheaper option,” Wingard said.

Some ways to reduce fees, Kassir said, include choosing cheaper funds, dropping managed accounts you no longer use and rolling separate IRAs into one.

“[Otherwise,] plans cost money to run. What matters is knowing your number and feeling like you got something for it.”

“Once a year, sit down and add up your fees," Kassir said. “What did your accounts cost you last year, in dollars, not percentages?” That may help you decide if you’re getting your money’s worth.

Editor’s note: Investing involves risk, including the possible loss of principal. Always consider your individual circumstances and consult with a qualified financial advisor before making investment decisions.

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.

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