This Tool Shows How Much Your Nest Egg Loses to Fees

If you have any retirement savings or otherwise invest any money, you can't afford not to use this new free calculator from a reputable nonprofit.

This Tool Shows How Much Your Nest Egg Loses to Fees Photo by WAYHOME studio / Shutterstock.com

If you have any retirement savings socked away, you’re already ahead of many folks. But you might not realize that your nest egg is at risk of losing thousands of dollars to fees by the time you retire.

That may sound extreme, but a difference of as little as 1 percentage point in fees can easily drain your retirement savings of tens of thousands of dollars, as we detail in “Of All the Fees You Pay, This Is the Worst.”

Think that could never happen to you? All it takes is to pay insufficient attention to your retirement account fees. And research by the Pew Charitable Trusts found last year that 31 percent of folks saving for retirement admit they are not at all familiar with their account fees.

To help more savers learn more about investment fees before it’s too late, the nonprofit Pew recently debuted a free online tool that illustrates the impact of fees. It’s called “How Fees Affect Retirement Savings Over Time.”

As the nonprofit explains the importance of the tool:

“Compound interest is a powerful feature of investing. Small sums put aside routinely can grow dramatically over time. However, the same forces apply to retirement plan fees; what may seem like small charges can compound over time, hindering investment growth and resulting in significant forgone earnings.”

The tool includes two scenarios and a calculator you can use to determine how much your own fees are hurting your nest egg. To use the tool, just click on one of these three options:

  • “Early Investor”: This scenario shows how two hypothetical investors in their 20s are impacted by different fees.
  • “Ready to Retire”: This scenario shows how two hypothetical 65-year-olds are impacted by different fees.
  • “Your Investment”: This calculator will show you how your retirement contributions or withdrawals are affected by the fees you’re paying on them.

To use the calculator, you will need to know several pieces of information about your investment fees. You may have to turn to your most recent statement or other investment documents.

For mutual funds, for example, you may need the prospectus — a long document you should receive when you buy into a fund. You can also look up your fund expenses using FINRA’s Fund Analyzer, a free tool that enables you to evaluate mutual fund expenses and compare expenses of one fund with another.

How familiar are you with your investment fees? Sound off below or over on our Facebook page.

Karla Bowsher
Karla Bowsher
I’m a freelance journalist and former newspaper reporter who has covered both personal and public finance. I've worked for a top 50 major metro daily and a community newspaper as well as ... More

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