Moneywise
6 min read
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For many people, being retired is almost synonymous with being frugal. With less control over your monthly income, it’s natural that you might become more focused on controlling expenses.
In fact, 52% of American seniors on Social Security said they were cutting back on discretionary items like dining out and travel due to the cost of living outpacing their benefits, according to a recent Nationwide survey. (1) Over 30% said they were even pulling back on essentials like groceries and medicines.
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However, there is one big expense that rarely gets mentioned and could be one of the easiest to cut without impacting your lifestyle: investment fees.
Here’s why this silent drag on your finances could be draining thousands of dollars from your nest egg over a 30-year investment horizon, especially if you’re doing well for yourself.
Paying a relatively high fee for investment advice or actively managed funds could seem like a savvy move on paper, especially if the targeted returns outpace the price.
First, the fees usually sound deceptively low. The average expense ratio for all active U.S. funds was 1% in 2024, according to Morningstar. (2)
Meanwhile, professional financial advisors usually charge a percentage of assets under management (AUM), often ranging from 0.5% to 1.5%, according to Yahoo Finance. (3)
Paying 1% for a professional to execute sophisticated strategies that involve options or exotic assets like private credit could seem justified. But the after-fee performance of many of these funds and strategies can fail to live up to the hype.
Only 33% of actively managed mutual funds and exchange-traded funds (ETFs) survived and outperformed their average passive peer over the 12 months through June 2025, according to Morningstar. (4) What’s more, since the fee is typically proportional to your assets under management, it will only increase as your portfolio grows.
According to Morningstar’s report: “Headlines about active managers’ superiority in navigating turbulence often decorate market declines. The data rarely backs this up—at least for the average active manager.”
