For many people, retirement is almost synonymous with practicing frugal habits. With little control over your monthly income, it’s natural that your attention might focus more on equalizing expenses.
In Canada, rising living costs have led many seniors to adjust their spending habits, with the high cost of essentials leaving little room for “lifestyle” spending, including entertainment, leisure and travel. According to a 2024 Statistics Canada report, nearly half of Canadians (45%) reported that rising prices were greatly affecting their ability to meet their everyday expenses (1).
Additional data from a 2024 Cross-Country Report on Aging in Canada from the National Institute on Ageing (2) emphasizes, “retirees may find that their personal savings have not kept pace with the rising cost of living, making it difficult to meet their ongoing needs.”
However, there’s another significant expense that’s rarely mentioned — and could be one of the easiest to jettison without impacting your lifestyle: investment fees. Here’s why this silent drain on your finances could be cutting thousands of dollars from your nest egg.
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Avoidable investment fees
Paying a relatively high fee for investment advice or actively managed investment strategies seems like a savvy move on paper. But in Canada, these costs can quickly add up. For example, equity mutual funds often charge management expense ratios (MERs) that can range anywhere between 1% and 3%.
Meanwhile, Canadian financial advisors typically charge a percentage of assets under management (AUM), with many full-service advisors charging between approximately 0.5% and 2.0% in 2025, depending on the size of the portfolio and level of services provided.
Paying 1% for a professional to perform sophisticated strategies that involve options or unconventional assets like private credit could seem justified. But the after-fee performance of many of these funds and strategies may fail to live up to the hype.
As a result, Canadian investors should carefully weigh the costs and benefits of actively managed funds. Morningstar’s 2025 Canadian Active ETF Landscape report (3) revealed that “Active ETFs offer cost savings relative to mutual funds, but alternative active ETFs’ performance fees make them 22% more expensive as of March 2025.” This reinforces the value of low-cost passive ETFs, which provide broad market exposure without the higher fees and underperformance risk often associated with most active strategies.
Simply stated, these investment expenses are avoidable — and cutting them out could save you a lot of money in retirement. That’s why billionaire investor Warren Buffett recommends average investors stick to low-cost index funds.
Read more: Here are 5 expenses that Canadians (almost) always overpay for — and very quickly regret. How many are hurting you?
Overpaying could be a costly mistake
Cutting out even a few basis points from the fees you pay for investing could make a big difference over the long term and help you redirect those savings to your essential daily expenses.
To understand this, assume you retire with $1 million and put the money into an actively traded mutual fund with a 1% fee. In one year, you’ll pay $10,000 in fees. Meanwhile, based on Morningstar’s data, you’re lucky if the actively managed fund has simply matched the performance of its average index counterpart.
Instead of paying high fees in an actively managed fund, you could invest $1 million into a low-cost, all-in-one ETF — such as Vanguard’s VEQT — which has an expense ratio of 0.24%. On that same $1 million portfolio investing in VEQT, you’ll pay $2,400 in fees — a savings of $7,600.
Those savings easily translate into a one-week Asian cruise in a luxury suite. Compound those savings over several years and this silent expense can drain tens of thousands of dollars from your net worth.
It’s easy to cut investment fees since it doesn’t require any major lifestyle adjustments. Simply make a phone call to switch your advisor, or click a button and switch to passive investing, to start saving money right away.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Statistics Canada (1); National Institute of Ageing (2); Morningstar (3)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.