Small percentages, large amounts
A 1% yearly fee sounds small. But it is charged every year on your whole balance, including past gains, and the money paid in fees no longer compounds. Over decades, fees can take a large share of the final value.
How the calculator works
Each option grows at the return minus its fees, compounded monthly, with the monthly contribution added each month:
Final value = P × (1 + m)^k + C × ((1 + m)^k − 1) ÷ m
where m is the monthly net return, k the number of months, P the starting balance and C the monthly contribution.
Worked example
$10,000 to start, $500 a month, a 7% return before fees, for 30 years:
| Option A | Option B | |
|---|---|---|
| Annual fees | 0.1% | 1.0% |
| Final value | $648,079 | $544,691 |
- Total contributed: $190,000 in both cases.
- Option B ends $103,387 lower.
- That is 16% of the final value lost to a 0.9 point difference in fees.
Typical fee levels
| Product | Typical yearly cost |
|---|---|
| Broad index fund or ETF | 0.03 to 0.2% |
| Target-date fund | 0.1 to 0.7% |
| Actively managed fund | 0.5 to 1.2% |
| Financial advisor (on top of funds) | about 1% of assets |
| Some variable annuities | 2 to 3% |
Where to find the fees
- Expense ratio: in the fund’s prospectus and fact sheet.
- 401(k) plan fees: in the annual fee disclosure from your plan; administrative fees can come on top of fund fees.
- Advisor fees: in Form ADV Part 2, which registered advisers must give to clients.
Do higher fees ever pay off?
Only if the extra cost buys something you value: better after-tax returns, advice that keeps you from costly mistakes, or planning help. Studies such as S&P’s SPIVA reports consistently find that most actively managed funds trail their index over 10 to 20 years, largely because of fees.
This calculator gives estimates for education and planning. It is not investment, tax or legal advice; for decisions about your own situation, talk to a qualified financial professional.