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What You're Paying For Financial Fees -- and How To Avoid Them

NEW YORK (TheStreet) -- Investing for your financial future is a high priority for Americans at any age, but it means you have to watch for and cut fees and expenses that can drain your assets at a bank or investment firm.

FeeX, a New York firm specializing in cutting fees for consumers, provides a helpful (and alarming) glimpse of just how much damage fees can do your financial fortunes.

For example, $760 in fees compounded over a quarter-century will grow (on a compounded basis) to $81,722 assuming a 5% annual rate of return.

That's more than $81,000 you could have really used for your retirement, or for big-ticket items such as college spending or the purchase of a new home.

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Investment management fees add up in small ways -- $150 here or $75 there over the course of the year, without you even knowing it. The average fee amount for mutual funds, for example, is more than $170 annually, says FeeX, and fees for financial products and services such as individual retirement accounts, 401(k) plans, insurance policies, bank accounts and brokerage account can drive your annual fee burden easily to that $760 fee figure and potential loss of $81,000 after 25 years.

"Hidden fees are extremely hard to find and cost Americans roughly $600 billion a year, with a majority paying over a third of their retirement to fees alone over the course of their savings," said Yoav Zurel, chief executive of FeeX. "There's a failure of transparency in the market, and we're working to expose that."

To alleviate fee headaches, and keep more cash in your financial accounts, take steps to reduce charges from banks and investment firms:

Switch to an index fund. Actively managed mutual funds can charge 1.5% to 3% of total account assets, and that can really add up. Moving to a passively managed index mutual fund can cut those fees in half or better.

Track trading fees. Invest trade stocks on a regular basis and you will likely feel the pain of commissions. Ask your stockbroker beforehand how much trades are going to cost, then see if you can't cut a better deal. If you can't, threaten to go to low-fee online trading sites that offer cut-rate stock trading commissions -- that should convince a stubborn brokerage firm to play ball.

Keep minimum balances in bank/investment accounts. Banks and investment firms will slap fees on customers for many reasons. One of the most common is for not keeping a minimum balance in a bank checking account. Another is for largely undefined "maintenance fees" that can cost $10 or so per month. If you keep a minimum balance, a bank or investment firm might waive such fees. In some cases, a bank will waive the fees altogether, but you have to ask. (It's definitely worth doing so.)

Always ask upfront about fees before signing off on any bank or investment accounts. This is one area where the squeaky wheel does get the grease, so keep after financial services firms on the fee issue and keep them honest.

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