How Wall Street Eats A Third Of Your Savings And Makes You Work Longer

In my post from a few weeks ago, I explained how Wall Street wants your balls - that is, if you compare retirement savings to balls, as I did in the second video in that post.

Investment advisors and mutual funds take money (or balls) out of your account, somewhere around an average of 1.5% a year. But that's not the only cost to you, because you now have a smaller account, and you've missed out on the growth of the money that could have been in your account if it didn't go to a financial-services entity.

To illustrate this, let's assume you have $100,000 and you invest that money in the stock market via a mutual fund that charges 1.5% a year. Let's also assume that the stock market returns 8% a year for the next 20 years, but paying 1.5% knocks your return down to approximately 6.5%. (Yes, paying some mutual funds and investment advisors leads to market-beating returns, which I'll get to later.) Here's what the next two decades could look like:

Year	Value at the End of the Year	Annual Fees	Cumulative Fees
1	$106,500	$1,500	$1,500
2	$113,423	$1,598	$3,098
3	$120,795	$1,701	$4,799
4	$128,647	$1,812	$6,611
5	$137,009	$1,930	$8,541
6	$145,914	$2,055	$10,596
7	$155,399	$2,189	$12,785
8	$165,500	$2,331	$15,116
9	$176,257	$2,482	$17,598
10	$187,714	$2,644	$20,242
11	$199,915	$2,816	$23,058
12	$212,910	$2,999	$26,057
13	$226,749	$3,194	$29,251
14	$241,487	$3,401	$32,652
15	$257,184	$3,622	$36,274
16	$273,901	$3,858	$40,132
17	$291,705	$4,109	$44,241
18	$310,665	$4,376	$48,617
19	$330,859	$4,660	$53,277
20	$352,365	$4,963	$58,240

Your initial investment more than tripled in value. To quote the Schoolhouse Rock song about interjections, “Hooray!” But along the way, you paid a total of $58,240 in fees. (“Eeks!”) That 1.5% you paid each year ended up being worth 17% of your ultimate investment. (“Drat!”)

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