Retirement savings seemingly starts out so simple, yet quickly becomes so complicated.
The initial game plan you sketch for yourself is to sock away as much money as you can, as quickly as you can – in whatever retirement vehicle your employer offers.
But as savvy nest builders have already realized, the dangers are in the details. If you are not vigilant and persistent, you can be tossing your hard-earned savings right into the pockets of unsavory fund managers.
Forbes.com contributor and author John F. Wasik offered three ways to hopefully supersize your retirement nest egg by keeping most of your money for yourself:
1] Beware the Overuse of Actively Managed Funds.
“These are mutual funds that employ managers who time the market. They rarely make more money than a passive market index after you subtract fees,” Wasik cautioned. He urged savers to always choose a passive index fund in your 401(k) to cover global stocks, bonds and real estate. You’ll be able to contribute more because the fees will be lower and the returns most likely higher than an actively managed fund.
2] Watch the Use of Revenue Sharing.
“These are hidden charges where a fund management company pays to be on a 401(k) platform. Those fees eat into your retirement savings, although you may never see them,” he explained. “Ask your employer if fund managers pay revenue sharing. If they do, ask them to bid out the plan’s management contract to find non-revenue sharing funds.”
3] Keep it Simple.
“You don’t need a dozen funds in your portfolio. You can cover all stocks, bonds and cash in four index mutual funds,” he wrote. “If you don’t have “global index” funds in your portfolio, ask for them. They are cheap and they cover just about everything,” he explained.
While stocks have risen to record highs, most Americans have little reason to cheer, according to the Associated Press.
“Despite the spread of 401(k) retirement plans, the wealthiest 10 percent of households own roughly 80 percent of stock market wealth,” according to the news wire. “The rising concentration of wealth at the top is one reason why the economy's significant gains since the Great Recession ended 7½ years ago haven't been felt by many Americans.”
The Dow Jones Industrial Average more than doubled in President Barack Obama's two terms, but wage growth was minimal for people without a college degree or technological skills.
“Only one-quarter of the poorer half of American households own stock. The average holding for those people is $54,000,” AP reported. “The proportion of Americans with retirement accounts actually declined slightly from 2010 to 2013 — from 50.4 percent to 49.2 percent.”