We all know that social security is at best tenuous and that working for one company for a lifetime and retiring on the company pension is something our grandparents or perhaps our parents could do is something in the past. In the 1970’s I was personnel manager for two large corporations and initially if someone had less than 5 years with their previous employer they were considered unstable. Then it quickly became 2 years and then if they moved for financial or other gain it did not matter if they were only 6 months with employers. The point is that in all probability the only entity we can count upon for retirement is ourselves as individuals.

One of the wisest decisions one can make is preparing for their long term financial security and one of the best tools available is the government sponsored Individual Retirement Account options available be it an employer sponsored 401 (k) account or an individual IRA with the immediate tax deduction or the much preferred Roth IRA which grows lifetime with no tax ever to be paid at time of withdrawal.

Most people don’t know that they pay fees for their 401 (k) plan or IRA accounts let alone their traditional mutual fund investments. Don’t be fooled. Even though most people maintain that fees are an important consideration in their investment decisions, most plan participants say they lack basic knowledge concerning them.

A recent AARP survey showed:

• 79% of those who make decisions about their investments consider fees to be an important consideration in making investment decisions.
• 83% admit they actually do not know ho much they pay in fees and expenses associated with their plans.
• 54% say they do not feel knowledgeable about the impact that fees can have on their retirement savings.

The same applies to other investment decisions. Many investors are not aware of the fees they pay and may believe they are not charged fees. Unfortunately they are not aware that fees can fit into many categories.

Most fees fit into these general categories:

• Investment Fees – the largest bite comes from fees you pay to a mutual fund companies that manage the investments.
• Administrative Fees – Operational expenses paid to your plan administrator such as record keeping, account services, accounting and legal services.
• Individual Fees – for operational, individual services, withdrawal or wire transfers.

Mutual funds charge management fees as a percentage of the assets invested in a fund. This is called an expense ratio and these can run from .50 to 1.75% or more. If the fund has a rate of return of 8% before the expense ratio then your individual return is going to reflect those expenses.

Did you know you can buy real estate with your self directed IRA account? Not likely a financial planner from a large brokerage house will advise this as they will not be paid fees on your account if you take it outside their asset control. Yet the opportunity for some outstanding investments in real estate will take place over the next 2-5 years.

You can never start planning for your retirement too early. Your money should work as hard as you did to earn it in the first place. Compounding interest and investment growth are the answer to wealth creation. Finding the right investment vehicles and fee based financial advisors; legal advice such as with estate and trust attorneys will help you attain the financial security you desire for your family.

Keith Webb
CEO