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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