Watch Out for These Banking and Investment Fees – Info Computing
Banking and investment fees could cost Americans more than $1.1 million over the course of their lifetime, according to a new report from NerdWallet.
The fees themselves—things like account maintenance fees, expense rations, etc.—cost $369,000 on average. But once you account for the investment return loss on those fees, the number balloons to $1 million-plus. Meanwhile, NerdWallet found the average American believes they’re spending just over $2,000 on fees over the course of their lifetime. That’s a big mental discrepancy.
Fees on your 401(k) investments are the main culprit, with mutual fund expense ratios and administrative fees costing you the most, according to NerdWallet.
You don’t have to be on the $1 million losing end, though. Here’s how to avoid them.
The report found that maintenance fees, ATM fees and overdraft fees cost Americans $18,000 over their lifetimes—and these fees are largely avoidable.
As Lifehacker covered previously, you should never pay a checking or savings account fee. There are plenty of banks and credit unions that have no- or low-account balance minimum requirements. If you are paying them and don’t want to move banks, you can call and ask to have it waived, or simply switch to a different type of account (perhaps one that doesn’t bear interest). You can also look for an online bank, which tends to charge far fewer fees than a brick and mortar.
Overdraft protection is an optional service that lets you complete a transaction even if you don’t have enough money in your checking account to do so. If you don’t want to pay an overdraft fee to use this service, turn it off, and your transactions will simply be declined when you go over your balance.
Finally, if you use an ATM outside of your bank’s network, you could be hit with a fee from your bank and from the owner of the ATM you used. Use your bank’s ATMs, or find a bank that reimburses third party fees (many online banks do this).
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401(k) and IRA Fees
You can’t get out of 401(k) fees altogether, but you can minimize them. As we’ve covered extensively, high fees don’t mean that the investment is better—in fact, there’s no reason to pay for funds with expense ratios at one percent or higher. Look for funds with low expense ratios, somewhere around one-quarter to one-half of a percent.
The same goes for IRAs, but also note that you may have to pay additional fees, like mutual fund sales loads, which are commissions charged on some mutual funds, and mutual fund transaction fees, which are fees charged by a broker when you buy or sell an investment. To avoid these, go with no-load funds and no-transaction-fee mutual funds, according to NerdWallet.
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Remember: It’s not hard to find low- or no-cost funds that will do a better job for you over the long run than many expensive funds. So do your research, and save yourself some money.
Article Prepared by Ollala Corp