The Top 3 Myths of Financial Planning

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Myth 3: Maintaining a stock portfolio is very inexpensive.

Even though you may be putting money into your retirement account on a regular basis, hidden fees may be slowly draining your account. The disclosed fees are simple to find. Look at the expense ratio, which is found in the prospectus. These fees are commonly referred to as “management fees.”

Administration fees are in addition to the management fees and are much harder to find. At first, you may think a small fee here and a nominal fee there is no big deal. After all, how much could these administration fees possibly be? Consider the following information, taken from the U.S. Department of Labor 401k fee website.

"Assume you are an employee with 35 years until retirement and a current 401k account balance of $25,000. If returns on investments in your account over the next 35 years average 7 percent and fees and expenses reduce your average returns by 0.5 percent, your account balance will grow to $227,000 at retirement, even if there are no further contributions to your account. If fees and expenses are 1.5 percent, however, your account balance will grow to only $163,000. The 1 percent difference in fees and expenses would reduce your account balance at retirement by 28 percent."

That's a huge fee! Therefore, be sure to look and ask your broker about plan-administration fees, investment fees and individual service fees. Knowing the truth about hidden fees and taking action to avoid them can add thousands of dollars to your retirement savings.

Plan Your Future Today

Whether you plan to retire today or in 30 years, you need to take control of your retirement accounts right away. Understanding how your money is invested and making sure it's working for you in the most efficient way will give you peace of mind and future security. By dispelling the key myths of financial planning and investing a little time and energy creating your future financial plan, you can rest assured that your retirement years will be pleasurable and prosperous.

Since 1991, Kris Miller has served hundreds of individuals and families, tailoring long-term, personalized financial plans that carefully preserve their principal and maximize return. He is the author of PREtirement Planning Essential. For more information, visit www.krismillermoneymaestro.com/retirementmistakes .

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