Why a 2% Investment Fee Could Cost You 60% of Your Retirement

The Hidden Cost of High Fees

When you look at your investment statement, a 2% or 2.5% fee might seem small. After all, if the market grows by 10%, you're still keeping 7.5% or 8%, right? Unfortunately, the math of compounding fees paints a much darker picture.

According to a National Treasury discussion paper, paying 2.5% in fees as opposed to 0.5% will erode 60% of your retirement savings over a 40-year period. This means that more than half of the wealth you generate over your working life is going directly to the financial industry, not into your pocket.

How Negative Compounding Works

We all know that compound interest is the eighth wonder of the world. But what many investors don't realise is that fees compound negatively. Every rand that goes to fees is a rand that can never generate future returns.

For example, a 10% gross return minus 1% in fees results in R5.6 million after 20 years on a R1 million investment. The same return minus 3% in fees results in only R3.9 million. That 2% difference costs you R1.7 million over two decades.

The Solution: Get an Independent Audit

The first step to stopping the leak is knowing exactly what you are paying. At Invest-Audit, we provide a 100% independent, flat-fee (R499) review of your retirement annuity, endowment, or unit trust. We calculate your true Effective Annual Cost (EAC) and show you exactly how much you stand to lose to fees over time.

Don't let hidden fees destroy your retirement. Request your independent audit today.