Do’s and Don’ts of Retirement
Mike Hydeck: Welcome back. Some hidden fees could be eroding your savings for retirement and that could have a dramatic impact on your future. Here now is Scott Puritz. He’s Managing Director of Rebalance. Scott it’s so nice to meet you, thanks for coming in. First and foremost we were just talking during the break, we do so many stories on banks and hidden fees and they get caught and they have to pay fines. These fees are obscure to find when you read your balance sheet, how can you find them in your retirement account?
Scott Puritz: Well those are hard, but they’re very, very common. The easiest thing is really just to switch to low-cost index funds, which are really the way to go.
Mike Hydeck: For a lot of us, it’s financial jargon that we can’t decipher, which means it’s obscure on purpose and the fees could be hidden within that jargon it seems. Am I correct on that, and what do we do?
Scott Puritz: You’re absolutely correct, and there is an initiative right now with the Department of Labor to make retirement investing safer for all Americans, and really eliminate these conflicts of interest, which lead to the hidden fees and obscuration. What consumers can do is migrate to low-cost index funds.
Mike Hydeck: How can you choose? You go online to any financial site and there may be thousands to choose from, how do you know what’s going to have low fee? How do you find it?
Scott Puritz: Well one of the safest names is Vanguard. They are a non-profit, they invented the low-cost index fund, and pretty much all of their products are low-cost and very well run and they have a whole family of index funds.
Mike Hydeck: Now you have some tips that you gave us ahead of time. One of them you said is to take the emotion out of it and keep the fees low. You’re saying that Vanguard is one of the choices that you can try to investigate to learn more. What are some of the others?
Scott Puritz: Keep it simple, Mike. For good retirement investing, all a person needs are two funds – a low-cost stock fund and a low-cost bond fund. We’ve all be subject to commission-based financial salesman, trying to push certain products and annuities. Keep it simple.
Mike Hydeck: What do you think the likelihood is of this legislation moving forward in Congress to try to make it a little bit simpler and bit more clear for investors and retirees?
Scott Puritz: The people who I trust, who know these things a lot better than I do, say that it’s highly likely to get passed and implemented by year’s end.
Mike Hydeck: And that could mean substantial savings when it comes to fees over time I would imagine.
Scott Puritz: A lot more transparency, and if not elimination then dramatic reduction of conflict of interests in financial services.
Mike Hydeck: Some reports that I have read said that you could lose up to 1% of your retirement nest egg by not being careful about fees. Does that sound right?
Scott Puritz: It’s much higher than that. Hidden fees can eat up to one-third of your investment benefit over twenty years.
Mike Hydeck: Keep it simple. Look for the lost-cost funds. Scott we appreciate your time.
Scott Puritz: Thank you Mike.