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My Portfolio Checkup Challenge – Portfolio Fee Creep

This past weekend, the blogger Joe at Retireby40 posted an article called: My Overdue Portfolio Checkup, and in the article he states that upon checking out his portfolio fees, they totaled $1,754.91 per year.  (Read his article for a great breakdown on his Portfolio Fee Creep, it’s a great read)!

Coincidentally, earlier in the same week, a friend was complaining about the cost of fees in his account.  He was complaining because he thought that the .8% that his 401(k) mutual funds were charging was too much.  That .8% works out to be $8 per $1,000 invested.  While not exactly low, the fees still didn’t spark my brain into calculating my own fees that I pay for the year in my 401k plan.  After all, we learn in statistics that anything less than 5% is statistically insignificant (joking here!), and since .8% is less than 1%, it can’t be that bad, right?  Wrong!

I figured that Joe had retired, and must have plenty of money to warrant such a hefty fee, and that in my case it wouldn’t really apply.  At least that was until I to broke down the costs of my 401(k) fees in my trusty excel spreadsheet!  Much to my financial horror, I too, was paying over a thousand dollar in fees!  WTF, I haven’t retired and I’m not even close to it in fact!

It was Portfolio Fee Creep!  When I started my 401(k) plan, and only have a little invested, the .5%, after all, on a $5,000 balance that fees only work out to be $25 per year, nothing to sweat if the return is good.  But now the fees totally over a thousand dollars, I’m pissed!  Oh not at the mutual funds companies, no they are not to blame…  Instead I’m more upset with my own lack of focus with respect to the operating expense fees.  You see, I consider myself a finance guy, and for me to ignore portfolio fee creep is just bad form on my part!

So as Joe has challenged me, I suggest that you check to see what your damage might be from your own portfolio fees too?  You might be surprised, I know I was!  Oh, and remember… even in a year when your mutual funds lose money, the mutual funds still take their fees out.  Talk about adding insult to injury!

Bests,

Don

12 Responses to My Portfolio Checkup Challenge – Portfolio Fee Creep

  1. I am guessing these are not load mutual funds or am I missing something. Is there anything you can do to lower or cancel the fees?

  2. Thankfully, my mutual fund fees have stayed the same over the last few years. I am monitoring them though. Fingers crossed.

    • As my portfolio has grown, the fees have too… huge bummer. while 1k in fees sucks, I guess it could be worse… 0k in fees would mean that I was doing horrible :)

      Still, it’s time to do some shifting of money around so the fee ratio is less than 1/2 of 1 percent!

  3. Evan says:

    Have you looked into whether your plan allows for an in service withdrawal?

    • Since the 10% penalty would apply, I haven’t really looked into it. I have a feeling since my provider offers a Roth 401k too, I don’t think they offer an in service withdrawal (unfortunately), but I could be wrong…

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