Costly Financial Fees You Might Not Know You’re Paying

At the supermarket, shoppers receive detailed receipts of their scanned and bagged items. After restaurant meals, waitstaff hand diners itemized bills. But call out “Check, please!” to a financial services provider and the result might be a rundown of cryptic line items — 12b-1? Expense ratio? — or a passing reference to Part 2 of Form ADV.

Thanks to a new fee-disclosure rule from the Department of Labor, financial pros who offer retirement advice will have to disclose all costs associated with their services and products beginning in April.

But a disclosure that meets the letter of the law might not tell you exactly how much you’re paying in dollars and cents. To find out, you need to know what those fees are called, where they’re referenced, and how they’re calculated.

What’s missing from your retirement savings statement
“Amount due for fees” isn’t a line item most investors will find in their statements. Instead, fees are typically expressed as a percentage of the assets in an account and then skimmed off the top of annual returns or baked into an investment’s share price.

The lack of clarity might explain why 46% of full-time employed baby boomers polled by investment advisory firm Rebalance IRA in 2014 said they believed they paid no fees in their retirement accounts.

If only that were true. Based on average contribution rates, 401(k) fees and plan costs, a median-income couple, both of whom work, would pay nearly $155,000 in investment fees over 40 years, according to public policy organization Demos. That’s almost one-third of their total retirement savings returns.

Read more at Nerd Wallet