Providing retirement account advice for our clients in Columbia, MO allows us to enjoy helping people through all kinds of retirement planning situations. As we help organize retirement financial resources like 401K accounts, insurance plans and social security; we like to make sure our clients understand the long term effect fees have on investment accounts.
Like water flowing through a canyon, fees slowly erode your overall return and thus take away financial options from you down the road. To judge whether or not you have a slow trickle of fees or a rushing torrent eroding your account balances, the first step is to determine what the fees are for your various accounts. The second step is to see if the fees charged are reasonable when compared to the benefit the managers are providing or are there lower cost alternatives available.
As a fee-only advisor, Clarity Financial is never compensated by recommending one fund or investment over another. Unlike many of our competitors, this compensation model allows us to focus on investments using a “best available” approach, not a “best we have to offer” approach. As such, we are also able to show how different fee levels impact your financial well-being both now and in the future.
Here’s a quick quiz about the impact of investment fees:
A Columbia couple, Lisa and Ron, are married and both 55 years old.
- They plan to retire in 10 years.
- They currently have $900,000 in retirement funds.
- Lisa contributes $1000 per month to her 401K and her company matches with an extra $500 per month.
- Ron contributes $14,500 of his own money into a SIMPLE Plan with no company match.
- If their accounts grow at a 7% annual return, the couple will have $2,287,445 at retirement age.
If they had been able to reduce their fees by 1% per year, how much more would their retirement funds total at retirement age?
A) $2,450 – Cost of a weekend trip to visit grand kids.
B) $29,540 – Cost of replacing your car.
C) $216,687 – Enough funds to pay off, or purchase a house.
Because of the effect of compound interest, the answer is “C”. Our hope with this article is to help local Columbia, MO residents who are researching information about retirement planning so they can make the best decisions for their situations.
If you are concerned about the fees you are paying for your investments, contact us to schedule a no-obligation first appointment. Alternatively, we can also help you craft a plan that helps your family meet financial goals like:
- Children or grandchildren attending private schools and later, secondary education like the University of Missouri.
- Vacation homes in places like Missouri’s Lake of the Ozarks.
- Utilizing good debt and avoiding bad debt
- Maintaining your quality of life during your retirement years.
If you would like to learn more about this and other personal financial topics and services, please contact us at 573-447-7007. Clarity Financial, LLC is a fee-only financial advisory firm in Columbia, MO. Appointments are welcome and initial consultations are free.
Member of the Alliance of Comprehensive Planners
CERTIFIED FINANCIAL PLANNER™ professional
Enrolled Agent designation from the IRS.
This article is the property of Clarity Financial LLC.
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