Everyone wants to save more money and grow their investments. And it’s especially important to do so for retirement. But for every dollar your investments make, you have to spend money to make more money.
Investment companies commonly charge high fees, leaving you paying hundreds – or thousands – of dollars just to grow your money. But now, things are changing. Today, new companies are taking investments out of advisors’ hands, helping you make more money.
And these new investment options can let you make more money for your retirement. Without high fees, expenses, or costs, here’s how you can significantly grow your retirement funds at a cheap price.
Look for Lower Investing Fees
One of the biggest ways you can lose money when saving for retirement is paying fees. Nearly every investment or savings option meant to exponentially grow your money comes with fees. But you shouldn’t waste hundreds of thousands of dollars in potential savings on fees.
Investing fees can eat away at your savings in a huge way. Paying just 1 percent in fees can add up fast – it could cost you over $590,000 in lost returns over 40 years of saving and investing.
Choosing an investment fund with lower investing fees can maximize your returns and seriously add to your retirement cash. If you choose a fund with a fee that’s 0.93 percent lower, you could wind up saving $215,000 in fees alone. And with compounding growth, that could earn you an extra $533,000 in savings.
A typical mutual fund charges what seems like a small amount of fees. The average fees rate is 1.2 percent. However, lower fees do exist. Investment options like Wealthfront and Betterment charge fees of just 0.25 percent. Imagine how much more money – how many more hundreds of thousands of dollars – you could make by opting for a lower fee fund.
Build and Manage Your Own Portfolio
Because investing fees can cost you so much money, it’s a smart idea to look for ways to get around them. And while the majority of investment funds and options charge fees of some kind, there is one way to spend exactly $0 of your retirement funds on fees: becoming your own investment advisor.
Investment platforms and funds charge fees because your money is being managed by someone else. Either a real person or a robo-advisor handles your retirement savings, choosing which exchange-traded funds (ETFs) are in your portfolio and how your money is growing.
However, if you eliminate those advisors altogether, you can grow your money without spending anything at all. It can make you richer when you retire – richer by as much as $345,000.
All you need to do is build your own ETF portfolio and manage it throughout the year. You can choose to actively manage your funds, trying to determine which will outperform and net you the biggest amount of money. Or you can opt for diversified index funds, which track the market on their own.
Whichever option you choose, handling your investments on your own could increase your retirement wealth significantly over years of saving.
Choose Robo-Advisors Over Traditional Advisors
Here’s another way to slash your fees and increase your retirement funds: choose a robo-advisor over a traditional advisor.
As mentioned above, traditional advisors charge high fees to actively manage your investments and your money. However, while these trained professionals are knowledgeable, technology has made it possible for robots to do the very same job. And they can do it well at a lower price.
Robo-advisors are a great in-between option for anyone who needs an advisor but doesn’t want to waste money paying high investment fees. They’re less expensive mutual fund options, and they cost far less over time. They cost approximately $232,000 over 40 years of saving, while a traditional advisor’s fees would total $454,000.
Let a robo-advisor manage your retirement investment portfolio, and you could retire hundreds of thousands of dollars richer. And you don’t need to worry about efficiency, effectiveness, or earnings.
Robo-advisors buy and sell stocks based on algorithms, and they do it at a lower cost. With lower overheads, little to no investment minimums, and lower fees, they’re a more financial savvy choice. Services like Charles Schwab, Vanguard, and WiseBanyan offer fees as low as 0.00 percent for anyone who opts for robots instead of traditional advisors.
Avoid Compounding Fees
If you do decide to invest your retirement savings with a service, fund, or advisor that charges a fee, there’s still an opportunity to retire with more money in the bank. The key is to look closely at any fees you’re paying – you should avoid compounding fees.
Compounding fees can cost you a ton of money. And they can lower the entire amount you’ll earn by investing your retirement funds. When you pay compounding fees, you’re paying money every time your fees increase, your account balance grows, or your assets change.
When fees compound, they add up quickly. A small fee that seems insignificant could wind up costing you hundreds of thousands of dollars if it compounds. Over 10 years, compounding fees could cost you as much as 6.4 percent of your money – or over $11,000. Over 20 years, those fees double to a loss of 12.4 percent, losing you more than $61,000 in retirement money. Over the course of additional years, you could lose as much as $592,000 in cash thanks to fees.
With compounding fees, you don’t just lose a tiny amount each year. You also lose the growth of that money. And that means that losing a thousand dollars here and there to fees could cost you serious cash when it’s time to retire.
Skipping investment options with compounding fees, however, could help you retire with all of that potential cash right where it belongs.
Pick the Right Financial Products
The right financial products play a critical role in your retirement savings. Choosing the wrong investments, funds, or accounts could leave you struggling to pay your bills when you retire. However, choosing the right products could earn you hundreds of thousands of dollars in savings.
From annual fees to compounding fees to advisors to the very accounts themselves, it’s crucial that you prepare for retirement by picking the right products. If you want to retire with hundreds of thousands of dollars, you’ll need to do more than simply save.
You need to do your research. You need to know which financial products offer the best return – and which take the least amount possible from your earnings. And the only way to find this information out is to search, learn, and stay up to date on the latest fees, retirement savings options, and ways to save.Towfiqu Photography / Getty Images