{"id":7867,"date":"2014-07-14T14:59:46","date_gmt":"2014-07-14T21:59:46","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=7867"},"modified":"2016-12-21T07:27:58","modified_gmt":"2016-12-21T15:27:58","slug":"retirement-savings-really-goes","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/retirement-savings-really-goes\/","title":{"rendered":"Where Your Retirement Savings Really Goes"},"content":{"rendered":"

Saving enough to retire someday is a tricky enough challenge. Yet as your account balance grows, beware. Money could be leaking out of your accounts unheeded.<\/p>\n

Nobody is “stealing” it, per se. Yet the cumulative effects of subpar performance and high fees has exactly the same effect. Your eventual\u00a0retirement\u00a0balance is lower than it might otherwise have been, a blow to\u00a0your own financial security<\/a>.<\/p>\n

\"retirement<\/a><\/p>\n

So where does the money go? Let’s count the ways:<\/p>\n

1. High account level fees<\/strong><\/p>\n

Brokerages often charge a set fee to even handle your IRA money, usually on the order of half of 1 percent or so. They have to do some administrative work, of course, but they should have the scale to drive down costs. If your brokerage isn’t chasing this figure down to nearly zero, consider moving your IRA to a larger, cheaper platform.<\/p>\n

2. High mutual fund fees<\/strong><\/p>\n

Besides the account level fee,\u00a0retirement\u00a0investors who use actively managed mutual funds must pay another 1% to 3% for each fund, which is the cost of the managers for each one. That easily doubles the cost of a\u00a0retirement\u00a0account, a\u00a0cost which only compounds over time<\/a>\u00a0as money is removed from your account to pay the fees.<\/p>\n

3. Excessive trading<\/strong><\/p>\n

Trading is not free, in most cases. Your active mutual funds, if they trade often, drive up your costs in the form of commissions. You don’t notice these costs because it shows up as lower-than-benchmark performance. Cost is often the reason mutual funds fail to keep up with the market itself.<\/p>\n

4. Emotional mistakes<\/strong><\/p>\n

Freaked out by a drop in your account? If you sell, it will very likely be at or near the market bottom. Those losses are permanent. Likewise, chasing an investment higher usually\u00a0results in a subsequent crash, then a panic sale<\/a>. Losses mount.<\/p>\n

5. Failure to rebalance<\/strong><\/p>\n

Burton Malkiel, author of\u00a0A Random Walk Down\u00a0Wall Street<\/em>, figures just rebalancing gave investors a 1.5% edge over the S&P 500 over the past 15 years. If you don’t bother to rebalance, you leave money on the table.<\/p>\n

Each of these errors, some self-inflicted, might not seem like a huge amount of money in any given year. But every dollar leaving your account leaves it forever and ceases to compound for your eventual\u00a0retirement.<\/p>\n

That adds up to a lot over the typical decades-long working life. That’s why it’s important to minimize these kinds of “money leaks” early and to stay on top of them.<\/p>\n","protected":false},"excerpt":{"rendered":"

Saving enough to retire someday is a tricky enough challenge. Yet as your account balance grows, beware. Money could be leaking out of your accounts unheeded. Nobody is “stealing” it, … Read more →<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":7870,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[47],"tags":[43],"yoast_head":"\nWhere Your Retirement Savings Really Goes | MarketRiders<\/title>\n<meta name=\"description\" content=\"Where does the retirement savings money go? 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