It is always nice to watch your retirement savings grow. When gains are posted to your 401(k) account, it has already overcome other significant costs — costs you may not even realize you are dealing with. For example, if you were to see a 5 percent gain in your 401(k) this figure would represent what you made after the fees were paid. So in actuality, you probably gained 6 to 8 percent, but between 1 and 3 percent was taken out to manage the account.
Consider, in addition, to these management fees, the following expenses to your retirement savings that you must take into account and determine what you can do to lesson them:
- Early withdrawal penalties.
- Market risks.
So many people just dump money into a 401(k) without considering how that money is affected. You work hard and save money but these additional costs end up draining that money out of your “savings bucket” almost as fast as you put it in.
Then to add insult to injury, when you turn on the income at retirement, Uncle Sam has his mouth open to drain out even more in taxes.
My advice to you is to learn the rules surrounding your retirement savings and then talk to a financial coach (not a financial advisor) about what you can do to decrease these costs. Contact me today, firstname.lastname@example.org or go to www.moneymastery.com for help.