Case Study: Jane

Here is an example of how high fees can damage your savings and retirement income. 

Meet Jane, a 30 year old teacher who has just started contributing to her 403(b). Jane is currently paying 2.5% in total 403(b) investment fees. Her current salary is $80,000. She contributes 10% of her salary per year and she expects an average annual return of 6%. 

At age 60, Jane’s account balance will be just over $500,000, while paying 2.5% in investment fees. You can’t avoid investment fees completely, but you can reduce them. What if Jane was able to reduce her investment fees from 2.5% to 1%? It doesn’t seem significant at first, but you can see how the difference of fees can add up over a long period of time, especially when it comes to your retirement savings. 

If Jane reduced her fees to 1%, her account balance at age 60, would be over $650,000 compared with $500,000 with 2.5% fees. That’s a difference of over $150,000. What would an extra $150,000 mean for your retirement? It could mean an extra $500 in monthly retirement income or an extra $6,000 in yearly retirement income. It could mean more family vacations,

more help for your grandchild’s education,

or a larger inheritance to leave for your loved ones.

The bottom line is that paying an extra 1-2% in investment fees matters a lot. 

Here at K-12 Financial Advisors, we are here to help you navigate your 403(b) so you can reduce your investment fees and make your retirement stress-free.