Investment Management Fees
Financial institutions charge different types of fees for managing investment accounts. It is important for relief associations to understand the fees charged. Fees can reduce earnings and lower account balances over time.
The chart below compares the impact various fee scenarios can have on the performance of a relief association’s investment account over time. Higher fees can have a significant impact on a relief association’s earnings and reduce the value of its account over time.
This is a hypothetical example for illustrative purposes only and not indicative of any particular investment plan. The figure assumes an account with a beginning balance of $200,000, an annual rate of return of 5.0 percent, and no withdrawals. Actual rates of return may vary and will depend on a number of different factors, including a relief association’s choice of investment options. The example illustrates, however, the increasingly negative impact higher management fees alone can have on investment value over time, when all other factors remain the same.
Published last in the August 2016 Pension Newsletter