Tuesday, February 18, 2014

Investment-Killing Fees

Since we're going into the final week of 401(k) enrollment meetings, here's a tip about maximizing your 401(k) investments.

The Crushingly Expensive Mistake Killing Your Retirement
401(k) fees are costing you hundreds of thousands of dollars over your lifetime.

... Returns aren't certain, but fees are. Now, maybe everything will go according to plan, and your 401(k) will be partying like it's 1999. Maybe the 1 percent—or more—that you're paying in fees will actually buy you market-beating returns. But probably not. ...

1.25 percent difference in annual fees adds up to a six-figure difference in lifetime earnings. That's because you don't just lose the money you pay in fees. You lose the returns you could have had on the money you pay in fees, too. As you can see in the chart below, this compounding effect doesn't matter much for the first 20 years or so, but really accelerates after that. If you chose the lowest-cost index fund, you'd have $15,000 more at age 45, $55,000 more at 55, and $159,000 more at 65. That would balloon to $257,000 more if you waited to retire at 70. ...

Studies confirm it, and years of data underscore it. The only reliable predictor of your investment returns over time is a) your asset allocation, and b) the cost of those assets in you investment portfolio.

"Hot managers" don't do it. ("The next Warrner Buffett!" More likely they'll be the next Jimmy Buffett, for all the oomph the hotshots will put into those expensive, actively-managed funds.)

So, what to do? Be diversified across asset classes, and keep your costs low.

TAG 401k Enrollment Meetings

Tues. - Feb. 18th -- DreamWorks Animation TV -- "Dragons"/Ventura Blvd -- 10 a.m. main conference room.

Wed. - Feb. 19th -- DreamWorks Animation Glendale -- 10 a.m. -- Dining Rm B

Thurs. - Feb. 20th -- DreamWorks Animation TV - Central -- 10 a.m. -- Conf. Rm. 2441


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