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How to Make an Easy $139,000 Comments

  • By MP Dunleavey
  • October 06, 2010

ball of money

You stare at your portfolio and worry. How is it going to grow into a nest egg large enough to sustain you when you're 70, 80, maybe even 90?

In addition to all the hints we've dropped about saving more, saving often, and—did we mention?— saving automatically, there's another way to save a little money now that will make a HUGE difference to your long-term stash:

Cut your fees.
Fees, you say, what fees? Late fees? Download fees?

No, investment fees. Clever Wall Street types long ago figure out that by charging people teensy-sounding management fees—like 1% of your assets—most investors would ignore those charges.

Decades and innumerable studies later, everyone knows that fees (aka, expense ratios) eat up an astounding chunk of your savings over time. And women, who need to maximize every dime (because we tend to earn less and live longer), have to be super fee savvy, says Miami financial planner Cathy Pareto, who ran some numbers for us.

You and your best friend each invested $50,000 in mutual funds that were nearly identical, but hers had an expense ratio of 0.75%, while yours charged 1.5%. You each save $5,000 per year for 30 years, and the fund delivers an 8% average return.

Your BFF's net return would be 7.25%; yours would be 6.5%.

In 30 years, she would have $902,300.

You would have $762,600.
 

Bottom line. So what's one of the most important questions you can ask when investing your money? How much am I paying for this fund?

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