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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 a recent survey from the Senior Citizens League, an overwhelming 94% of respondents said that the 2025 cost-of-living adjustment to Social Security wasn’t enough to keep up with their actual expenses (1).
What’s more, 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 survey by Nationwide (2). More than 30% said they were even cutting back on essentials such as groceries and medication.
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 drain 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 (3).
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 (4).
Paying 1% for a professional to execute sophisticated strategies involving options or exotic assets like private credit might seem justified. But the after-fee performance of many of these funds and strategies can fail to live up to the hype.
Legendary investors like Warren Buffett echo this sentiment.
“Costs really matter in investments,” Buffett said during an interview with CNBC in 2017 (5).
“If returns are going to be 7 or 8 percent and you’re paying 1 percent for fees, that makes an enormous difference in how much money you’re going to have in retirement.”
And the research supports his argument. 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 (6).
“The record shows that the unmanaged index fund is going to do quite well over time, and active investment as a group can’t beat it,” Buffett said in the same interview.
Since an AUM 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.”
Put simply, these expenses are avoidable. And cutting them out could save you a lot of money in retirement. That’s why billionaire investor Warren Buffett recommends that everyday investors stick to low-cost index funds.
Still, most financial experts agree on one thing — you shouldn’t put all your eggs in one basket. And not everyone is aware of their options, even when it comes to ETFs and index funds.
With economic uncertainty on the rise, building a diversified portfolio can give you more breathing room, especially if the market takes a hit. This way, you can reduce the risk of needing to withdraw money during a downturn or watching a chunk of your savings get wiped out.
That’s why it can help to talk things through with a vetted financial expert at least once. They can walk you through your options and help you invest wisely so you can protect your nest egg for the long haul.
You can easily connect with a vetted FINRA/SEC-registered financial advisor near you for free through Advisor.com.
All you have to do is answer a few questions about your financial situation, and Advisor.com will connect you with a qualified expert. Every advisor on their network is a fiduciary, meaning they’re legally obligated to act in your best interests.
Cutting even a few basis points from investment fees could make a big difference over the long term.
To understand this, assume you retire with $1 million and put the money in an actively traded mutual fund with a 1% fee. Your fee expense is $10,000. Meanwhile, based on Morningstar’s data, you’ll be lucky if that actively-managed fund even matches the performance of its cheaper, passive counterpart.
For instance, you could invest that same $1 million into a low-cost passive fund, such as Vanguard’s S&P 500 ETF (VOO) with an expense ratio of just 0.03%. Your fee for a single year is just $300, and the performance is likely to be just as good, if not better, than an actively-managed fund.
Assuming equal performance, you’d pay $9,700 more for the active fund in a single year. That’s the cost of a nice vacation. Over several years of compounding and opportunity costs, this could drain tens of thousands of dollars from your net worth.
And the best thing about cutting investment fees? It’s easy to pull off and doesn’t require any lifestyle adjustments.
With platforms like Robinhood, you can invest in ETFs like the Vanguard S&P 500 to get a start on your nest egg.
Robinhood has 24/7 support, and you won’t pay any commission fees on stocks, ETFs and options. Their platform also offers both a traditional IRA and a Roth IRA, so you can benefit from tax-efficient retirement investing. You can also set up recurring investments of your preferred fractional shares, stocks and ETFs on your own schedule. Over time, this helps make investing a habit and steadily grow your portfolio.
Even better, new Robinhood customers can also get a free stock once you sign up and link your bank account to the app.
You can pick your stock reward from top American companies, with amounts ranging from $5 to $200.
While Warren Buffett recommends beginners to stick with index funds, he didn’t build Berkshire Hathaway’s fortune by investing everything in just one fund. As of the third quarter of 2025 — before Buffett retired — Berkshire Hathaway’s wealth was concentrated in just 41 stocks — underscoring the importance of picking your stocks with care (7).
But for most investors, it can be difficult to identify value stocks with precision. Fortunately, you can get advice from hedge fund analysts, thanks to platforms like Moby.
Moby’s team of former hedge fund analysts and experts spend hundreds of hours each week sifting through financial news and data to provide you with breaking stock recommendations. And if you sign up for Moby Premium you get one free top-stock.
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