Fees can drain your accounts, so watch them carefully.
You have saved for many, many years and are now ready for retirement. You need to accomplish many tasks as you get ready to leave your job but one of the most important things to watch for as you go over your accounts is hidden fees, according to US News & World Report in a “10 Hidden Fees to Be Aware of in Retirement.”
Annuities. When you buy an annuity, the sales person receives a commission. There are also underwriting and management expenses. Annuities are generally understood to have higher fees than typical mutual funds, so be aware of the cost and the benefits before making a purchase.
Advisory Fees. In a non-fiduciary managed account, typically with a broker who is not a registered investment advisor or CFP, it may not be easy to discern the fees. Ask questions and make sure that you understand how much of your money is being invested and how money is being used on fees.
Inactivity Fees from Brokerage Accounts. Here's money tossed away. Check the fine print on your online brokerage accounts to be sure you are not spending money because the account is not active.
RMD Penalties. Anyone over age 70 ½ [extended to age 72 in 2020 pursuant to the SECURE Act] is required to take an annual minimum distribution from their IRA and other retirement accounts. If you take the money by December 31st, you are fine. However, if you forget, the penalty is steep: it can be up to 50% of the required withdrawal amount. That is an expensive mistake.
Mutual Fund Expense Ratios. These are fees charged to cover a fund's annual expenses. If you don't know what they are, find out what you are spending on an annual basis.
Home Costs. If your retirement includes aging in place, make plans to ensure that your home remains safe. This can include changing out a tub for a walk-in shower, adding a downstairs bedroom or repairs.
Car Costs. If you've got two cars but only use one, you should consider becoming a one-car household.
Travel in Retirement. Make the most out of your travel budget and be more aware of additional costs in organized trips. If you're savvier about spending, you'll likely be able to take more trips.
Inflation. This basic economic occurrence has been historically low in recent years. However, it does not go away. Make sure that you're prepared, if and when it returns with a bang.
In addition to going over your accounts, take some time and meet with your estate planning attorney.
Reference: US News & World Report (July 18, 2018) “10 Hidden Fees to Be Aware of in Retirement.”
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