No More Smoke and Mirrors

After understanding the magic of compound interest you may get eager and anxious to start saving. On your path of wealth accumulation you will find advisers and companies that for a seemingly low fee they promise the largest yields. They may even preface the old adage “you get what you pay for.” Implying that if you want larger yields than the market’s average you must invest you must also pay for the service. DO NOT!

Anybody promising better than average returns is most likely a talker. Someone that is selling you the idea of investing in products with hidden fees or simply high fees. You may hear fees ranging between 1.5% to 3%, which actually may sound like not much. But it is actually a lot when compared with funds offered by companies such as Fidelity and Vanguard, where funds may cost as low as 0.014% yearly. Fidelity has even some new funds where yo pay no fees whatsoever. They are called Zero index funds.

Fees erode your savings and the results can be  staggering.

Think about it. If you have $100,000 in your 403B, you may have to pay $14 a year to cover the fund’s expenses. Whereas, with one of those predatory companies selling you annuities or investing products with hidden fees, like AXA,  you may pay easily $2,500 or more.
If you are one those folks who says “I don’t know anything about the market!” Don’t worry. You don’t have to know much or anything at all, other than avoiding pesky fees and predatory advisers and companies.

What you really need is a solid 403B plan that gives you access to reliable companies. These companies offer target funds. What are they? Ready to go, balanced portfolios that re-balance themselves as you approach your time of sailing onto the sunset. In other words, if you are planning to retire, let’s say, in 2045, you will find a target fund 45. You just set up your automatic contribution with each paycheck and before you know it, you will see your savings growing exponentially.
If you are a teacher, don’t wait to set your wheels in motion. It’s never too late, but more importantly, it’s never too early.

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