Why Your Retirement Account is Missing $186,000

An eye-opening Report released last month by the Center for Retirement Research at Boston College reveals that the fees charged by mutual funds and 401(k) and IRA plans will slash the value of the typical person’s account by almost 37%!

That means if your account should have been worth $500,000, you end up with only $314,000 – all because of stealth fees that are draining your hard-earned savings! That’s $186,000(!) of your money that will end up in other people’s pockets, not yours.

These money-sucking fees often apply even to funds that track stock market indexes such as the S&P 500… as well as to the “Target Date” Funds that most employers now automatically put employees’ 401(k) money into.

Listen to John Bogle, the founder and former CEO of Vanguard, who many consider to be the father of the indexed mutual fund, quoted in MarketWatch:

Question: “If you pay a hefty fee to an active manager, what happens to your potential return?”

Answer: “Nothing good. At 2.5% over a typical investor’s lifetime, an astounding 80% of compounding returns ends up in the hands of the manager, not the investor.”

Bogle notes,

When our financial system – essentially our money managers, marketers of investment products and stockbrokers – put up zero percent of the capital and assume zero percent of the risk, yet receive fully 80% of the return, something has gone terribly wrong in our financial system.”

I did some deep research into the fees charged by mutual funds and retirement accounts, and what I discovered is mind-blowing.

For example, I looked at three popular S&P 500 Index funds and discovered that the worst of the three siphoned off 14.4% of your account value in 10 years, 26.6% in 20 years, and a staggering 37.2% in 30 years.

On a $100,000 Initial Account, that Adds Up to $160,712 in Lost Cash!

And other than the fees charged, these funds are identical! They’re all so-called “passively-managed” funds that simply track the S&P 500 Index. It’s not rocket science!

But what about the fees you pay in a Bank On Yourself plan?  Aren’t they pretty hefty, too?

It’s interesting how the people who complain the loudest about the fees in Bank On Yourself plans (supercharged dividend-paying whole life policies) are stockbrokers and financial advisors.

But the reality is that those whining money managers are actually making up to ten times as much off your business as a Bank On Yourself Professional will!

In my New York Times best-selling book, I use the example of putting $10,000 per year for thirty years into a Bank On Yourself- type policy and the very same amount into an investment account.

If the market has moderate returns, your investment advisor will earn $100,000 – or more, while the Bank On Yourself Professional will receive a commission of just $8,500 over 30 years.

And your investment account manager will NOT be able to tell you how much your account is going to grow over the next 30 years because he has no clue!

On the other hand, before you ever initiate a Bank On Yourself plan, you’ll know the minimum guaranteed value of your plan in ANY given year.

And, by the way, unlike the fees you pay a money manager, which are tacked on and compound against you every year, ALL fees and expenses of a Bank On Yourself plan have already been deducted from your guaranteed bottom-line numbers.

There are no surprises and no smoke-and-mirrors.