Avoiding Mutual Funds Fees and Retire Earlier

The more you read, the more you will uncover the ongoing discussion of how mutual funds are being challenged to reveal the true costs of investing in them. As an article I recently ran across by Ruthie Ackerman demonstrates, “Ask a broker why 12b-1 fees exist and you’ll get a variety of answers. The fees cover marketing and distribution costs, processing and record-keeping costs in a 401(k) plan, payment for brokers, and sale of fund shares. In a speech in Washington, D.C., earlier this month Schapiro said there should be greater transparency around the fees, which could be as high as 1%.” If the paper trail ends cold, maybe that should be of concern. I am sure to bet any Investing 101 manual would have you challenge fees that are not clearly spelled out.

This past weekend’s Wall Street Journal ran an article titled Earlier Retirement:Beating Back High Fees that thankfully discusses how many employees are finally starting to challenge their employers on 401(k) fees within their company plans. This article offers some great warning signs and tips. My vote is to work with your employer to have them entertain offering index mutual funds and exchange traded funds to the investment options mix. With their low cost fee structure, one can then actually look to earlier retirement. For beginners new to the investing game, or those that are nearing retirement, investing in index funds and exchange traded funds in fees alone will allow you to retire earlier than you would paying the higher fees inherent in mutual funds. That too, is only the beginning as returns on index funds have been quite promising over the years relative to mutual funds. I encourage you to check them out.