For the past several years, I have been reading posts exhorting me to look at fees in my investing accounts. I have been told that investment fees will cost me millions. That I’m leaving money on the table if I don’t fix this, ASAP.
Since most of my retirement money is either in very low cost funds (thank you, current employer) or individual stocks (that’s another argument for another day; but I’ll point out that buying and holding for 6-10 years means very few management fees), I worry less about investment fees for most of my accounts.
Of course, I do have the retirement account from my first job out of residency…
Overall, this account is never going to grow very large, as I can’t contribute to it anymore. It represents the contributions from slightly less than 4 years, plus reinvestment of dividends. When I first started thinking about investment fees, the difference between 0.1% and 1.1% in fees was about $400 a year. Not nothing, but not $100,000, or $1 million, as could certainly happen if I could grow the account with continued contributions. I figured there was nothing to worry about, unless I had 250+ years to invest.
The other reason I didn’t worry too much about fees for this account: when I first heard about the problem of excessive fees, I reviewed the investment options available to me. There were no low-cost fee funds, and the fees ranged from 0.5% to 1.6%. I figured as long as I wasn’t in the highest fee funds, I was doing OK.
I would, from time to time, get notices that one fund or another was being phased out. I might have read that a new fund–one with a front-load–was the new substitute. (A front load meant that I was paying a percentage for the privilege of investing in that fund. Money that was gone forever from my investments.) This was annoying. But, again, the amounts were so small ($50? $100?) that it wasn’t worth falling behind in my real job to call the account administrators.
Last week (during my staycation), I had the time and inclination to check this old retirement account again. I found some pleasant surprises.
One. My investments had tripled since I separated from my old employer. That was a nice surprise!
Of course, that meant that the money lost from excessive fees now looks like $600-1300 a year. Oops.
Two. The investment options now include very low cost funds from Vanguard. That means I really can save money on fees now, rather than wishing that there were low fee funds (like the type I’m always told to buy, only they aren’t there!).
While fees for this account may not cost me millions, $1000 a year is starting to sound like a lot of money. I have some work to do next week in my retirement account!
How often do you check on your retirement accounts? Do you think about management fees? Do you have low cost options?