6. Advisory Fees

Although financial advisors need to pay rent and eat just like anyone else, the rhetoric they usually use to communicate how much you’re being charged may be a little too inconspicuous.

“Basis points” is a phrase advisors often use, which basically means “tiny fractions of a percent.” For instance, 1% comprises 100 basis points, which means that a 50-basis-point fee equals 0.50%.

An advisory fee of 1% of assets is typical, but it’s important to understand what 1% will cost you. In other words, these kinds of costs are more likely to be hidden fees because people tend to overlook them.

Let’s say your portfolio is worth $500,000. If your financial advisor charges you 1% in advisory fees, you’ll have to pay about $5,000 annually, which is a lot! To find out how much you’re paying, ask for your total annual charges. Then compare that amount to the service you’re receiving to determine if you’re OK with the fees.

Keep reading to discover other hidden costs you may face during retirement!