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For many people, being retired is almost synonymous with being frugal. With less control over your monthly income, it’s natural that you might become more focused on controlling expenses.
In fact, 52% of American seniors on Social Security said they were cutting back on discretionary items like dining out and travel due to the cost of living outpacing their benefits, according to a recent Nationwide survey. (1) Over 30% said they were even pulling back on essentials like groceries and medicines.
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However, there is one big expense that rarely gets mentioned and could be one of the easiest to cut without impacting your lifestyle: investment fees.
Here’s why this silent drag on your finances could be draining thousands of dollars from your nest egg over a 30-year investment horizon, especially if you’re doing well for yourself.
Avoidable investment fees
Paying a relatively high fee for investment advice or actively managed funds could seem like a savvy move on paper, especially if the targeted returns outpace the price.
First, the fees usually sound deceptively low. The average expense ratio for all active U.S. funds was 1% in 2024, according to Morningstar. (2)
Meanwhile, professional financial advisors usually charge a percentage of assets under management (AUM), often ranging from 0.5% to 1.5%, according to Yahoo Finance. (3)
Paying 1% for a professional to execute sophisticated strategies that involve options or exotic assets like private credit could seem justified. But the after-fee performance of many of these funds and strategies can fail to live up to the hype.
Only 33% of actively managed mutual funds and exchange-traded funds (ETFs) survived and outperformed their average passive peer over the 12 months through June 2025, according to Morningstar. (4) What’s more, since the fee is typically proportional to your assets under management, it will only increase as your portfolio grows.
According to Morningstar’s report: “Headlines about active managers’ superiority in navigating turbulence often decorate market declines. The data rarely backs this up—at least for the average active manager.”
Put simply, these expenses are avoidable. And cutting them out could save you a lot of money in retirement. That’s why billionaire investor Warren Buffett recommends that everyday investors stick to low-cost index funds.
Acorns can be a great way to start investing in these kinds of ETFs, with fees starting from just $3 a month.
Here’s how it works: When you make a purchase on your credit or debit card, Acorns automatically rounds up the price to the nearest dollar and places the excess into a smart investment portfolio, tuned to your appetite for risk.
Their diversified, expert-built ETF portfolios can help limit the possibility of poor performance from a single asset, as you’re instead invested in a basket of stocks. Depending on the portfolio you choose, you can invest in a mix of companies, markets and bonds. This even includes a Bitcoin-linked ETF.
Sign up now, and you can get a $20 bonus investment when you set up a recurring monthly investment of at least $5.
Read more: How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement
Overpaying could be a costly mistake
Cutting even a few basis points from investment fees could make a big difference over the long term.
To understand this, assume you retire with $1 million and put the money in an actively traded mutual fund with a 1% fee. Your fee expense is $10,000. Meanwhile, based on Morningstar’s data, you’ll be lucky if that actively-managed fund even matches the performance of its cheaper, passive counterpart.
For instance, you could invest that same $1 million into a low-cost passive fund, such as Vanguard’s S&P 500 ETF (VOO) with an expense ratio of just 0.03%. Your fee for a single year is just $300, and the performance is likely to be just as good, if not better, as the actively-managed fund.
Assuming equal performance, you’d pay $9,700 more for the active fund in a single year. That’s the cost of a nice vacation. Over several years of compounding and opportunity costs, this could drain tens of thousands of dollars from your net worth.
And the best thing about cutting investment fees? It’s easy to pull off and doesn’t require any lifestyle adjustments.
If you’re not sure about where to invest your cash, one option is to park it in a high-yield account while you sort out the details.
With SoFi, you can get fee-free banking on your checking account. So, no fees, no monthly maintenance costs and no minimum balance requirements.
You can earn 4.50% APY on savings balances and 0.50% APY on checking balances with direct deposit or qualifying deposits too. When you set up a direct deposit, new account holders can even get a cash bonus up to $300.
Deposits are insured up to $250,000 through SoFi Bank, with additional coverage up to $2 million through the SoFi Insured Deposit Program.
But for high-earners a 4.5% APY might just not be enough to meet you goals, especially with capital on hand. If that sounds like you, another options is to work with the investing and tax experts at Range.
Range is tailor-made for households making at least $300,000 or individuals making a minimum of $250,000. Given the flat fee structure and 0% AUM in fees this could make them an appealing option for charting your way to wealth.
With Range, you get access to a team of advisors who can support you with financial planning, taxes (including real estate management), equity compensation and estate planning — all under one roof.
And the best part? You can book a complimentary demo to get started, and see if Range’s comprehensive package matches your financial goals. Even better, as a Registered Investment Advisor (RIA), Range is legally required to make recommendations with your best interests in mind.
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Article sources
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Nationwide (1); Morningstar (2), (4); Yahoo Finance (3)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.