How Did Your Investments Really Do in 2020?

When you’re reviewing quarterly and year-end performance in your 401(k) and brokerage account statements, it’s important to consider how much you may be paying in annual fees (expense ratios) to mutual funds and commissions to brokers. These combined costs could be as high as 2% per year. While this may seem small, over several decades of investing, these costs could potentially reduce the value of your retirement nest egg by tens of thousands of dollars. And if you’re retired and now invest mostly in low-yielding bond funds, these costs may actually wipe out the small amount of income these funds generate each year.   It’s up to you to research how much you’re paying in investment costs, and whether less expensive options are available. For example, most mutual funds come in various share classes, each of which have different expense ratios. Shares of funds you purchase on your own may have significantly lower expense ratios than different share classes of the same funds you purchase through a broker, which may add on as much as 1% in additional “marketing” fees to pay brokerage commissions. Not to mention added “back-end” sales charges if you sell shares before a certain time period has elapsed.   If you invest on your own and you’re not a strong believer in the ability of mutual fund managers to make the best investing decisions, consider investing in index funds and ETFs that offer broadly diversified exposure to different segments of the market at a fraction of the cost of actively managed funds.   If you’re working with a broker, ask them to disclose the total annual costs of the funds they’ve sold you. If these costs seem too high, ask them to recommend cheaper alternatives that have similar characteristics and track records—but make sure you won’t have to pay back-end sales charges if you make the switch. If your broker doesn’t take your cost concerns seriously, consider firing them and hiring a fee-only fiduciary investment adviser to manage your portfolio. These professionals charge you an annual fee (which they will fully disclose) and never accept commissions from fund companies. In exchange, they’ll be able to tell you exactly how much you’re currently paying in mutual fund fees and recommend lower-cost options that align with your investment objectives and risk tolerance. 

Om Podcasten

Whatever life after 50 looks like to you, thinking about money in retirement shouldn’t keep you up at night. We’re all dealing with the big questions about money and aging: How much you can really spend, how to invest your life savings without risking it all in the stock market, and should you sell your home and downsize? Then there’s the biggest unknown: how much health care you’ll need, and whether your savings and insurance is enough to cover the costs. This is personal. These topics may not be easy to talk about with your own family. That’s why nationally known personal finance experts Terry Savage, Richard Eisenberg, and Pam Krueger and are here to open up the dialogue so you can learn how to define your retirement and deal with your money on your own terms. These three friends think, write, and speak about these issues. And now they’re joining forces to give you the benefit of their experience, wisdom and advice in their new podcast, Friends Talk Money. Each week Richard, Pam and Terry will discuss a different piece of the retirement pie. Everything from Social Security and Medicare to investing and cash flow management is on the table, with practical, common-sense advice on how to deal with these and other challenges. But don’t expect cut-and-dried answers. These friends have strong opinions, and aren’t afraid to debate the pros and cons of their friends’ recommendations. But what you will walk away after each episode is a greater awareness of the retirement planning issues you’ll need to address with the help of your family, friends and financial advisor.