TONY'S BLOG
 
2.4% Fees

August 1, 2016

One of the many luxuries I have is meeting face-to-face with so many “Savers.” These folks are more concerned about the return OF their money than ON it. My job is to assist them in using, enjoying and protecting more of their hard-earned money in retirement. With the hundreds of people I meet each year, I hear, first hand, what is really ticking them off and one of those things is high fees.

 

Just the other day, a widow wanted me to review the account she had with an advisor to see if I could offer here something with lower fees and less risk. She described a recent conversation with her advisor and said the following:

 

“Well, I recently asked him to tell me how he got paid.”

 

The nice lady went on to say that, much to her surprise, the advisor was charging her 2.4% each and every year, whether she made any money or not. In her case, based on the size of her account, that’s nearly $15,000/year in fees!

 

No wonder she was so ticked off.

 

So I did the following calculation to show her how our process, using a fixed indexed annuity with a 40% participation rate & no fees might compare to her current investment account with the 2.4% annual fee. I made the following assumption to explain:

 

Let’s say she invested $100,000, and after the first year, the market went up 20%, taking her balance to $120,000, but with a fee of 2.4%, Wall Street takes over $2,800. The next year, the account grows by another 20% and the balance jumps to around $144,000 and Wall Street takes 2.4% of THAT, which is over $3,300! But in the third year, the market goes down 20%, but Wall Street STILL gets their 2.4% fee of $2,700. Now, the balance is at $110,000. That is what I call a roller coaster of a ride, especially if you’re retired or nearing retirement.

 

So instead of putting $100,000 in a managed account with Wall Street, what if we put the same amount of money in a 40% participation fixed indexed, no fee annuity? Given the same market gyrations, what would the account be worth with no risk and no fees after three years? Over $6,000 more than the managed account!

 

Now that’s what I call “Sleep Insurance.”