“If you’ve faithfully set aside money for retirement over the years, it pays to sit down and review your finances before you leave your job. You may be surprised to see that your budget has been drained by fees, including service and management fees tied to your retirement accounts.”
Annuities. When you buy an annuity, the sales person receives a commission. There are also underwriting and management expenses. Annuities are generally understood to have higher fees than typical mutual funds, so be aware of the cost and the benefits before making a purchase.
Advisory Fees. In a non-fiduciary managed account, typically with a broker who is not a registered investment advisor or CFP, it may not be easy to discern the fees. Ask questions and make sure that you understand how much of your money is being invested and how money is being used on fees.
Inactivity Fees from Brokerage Accounts. Here’s money tossed away. Check the fine print on your online brokerage accounts to be sure you are not spending money because the account is not active.
RMD Penalties. Anyone over age 70 ½ is required to take a minimum distribution from their IRA and other retirement accounts. If you take the money by Dec.ember31st, you are fine. However, if you forget, the penalty is steep: it can be up to 50% of the required withdrawal amount. That is an expensive mistake.
Mutual Fund Expense Ratios. These are fees charged to cover a fund’s annual expenses. If you don’t know what they are, find out what you are spending on an annual basis.
Home Costs. If your retirement includes aging in place, make plans to ensure that your home remains safe. This can include changing out a tub for a walk-in shower, adding a downstairs bedroom or repairs.
Car Costs. If you’ve got two cars but only use one, you should consider becoming a one-car household.
Travel in Retirement. Make the most out of your travel budget and be more aware of additional costs in organized trips. If you’re savvier about spending, you’ll likely be able to take more trips.
Inflation. This basic economic occurrence has been historically low in recent years. However, it does not go away. Make sure that you’re prepared if and when it returns with a bang.
Smart financial planning can make your retirement dollars go further. Your planning should also include a visit with an estate planning attorney.
Reference: US News & World Report (July 18, 2018) “10 Hidden Fees to Be Aware of in Retirement.”