After you have spent your whole life today, saving and saving to save enough money to retire, the last thing you want is to be “taken away,” right? Unfortunately, there are many subtle and legitimate “thugs” that can deprive you of a comfortable retirement.
All this is perfectly legal, and most people voluntarily surrender to them, without thinking about the negative impact they have on their nest. They have become ordinary expenses and are considered minimal, but if we put them all together, their total value can be incredible!
These are some of the most apparent nest egg “bandits.”
Interest credit card
When you get a fixed income, obviously you also need to “fix” your expenses, so you do not get into a negative situation. Whenever you use a credit card to buy something for which you do not have cash, you unwittingly agree to pay interest on the item to get it now. Debit cards, on the other hand, can be used by the same merchants to buy goods and services with funds immediately credited to your account. With a debit card, you will never have to pay interest. For retirees with a fixed income, interest in credit cards is perhaps the most violent of the “bandits”!
Brokerage fees and commissions
When you invest your nest in stocks, bonds, index funds, and mutual funds, there is usually a “user fee” or an intermediary commission or other finely disguised costs associated with the investment. You can research any Mutual Investment Fund, Capital Fund, or Index Fund and look for your “expense ratio.” This number, expressed as a percentage, will be collected each year from the money you have invested, for the honor and privilege of owning this particular account and can read more to get more info.
For mutual funds, this rate is somewhat higher, since you have to pay a team of people who manage the fund daily. Since index funds are invested in an entire market segment, there is no leadership or research group, and there are almost no purchases and sales. Therefore, index funds, in general, have a cost ratio (0.02 to 0.80%) significantly lower than the mutual funds administered (1.2 to 3.4%). These rates can vary from 2% to 3% or more of your money, and this is a heavy burden for you when you are trying to live off your investment.
Service contracts
Every time you buy a device, a car or some other “big ticket,” the distributor or supplier offers you more and more an extended warranty on the product for a fee. As a general rule, they spread the manufacturer’s warranty for an additional period and can cost from 2% to 8% of the product’s value. More than 90% of extended warranties are never used, and this is a very high benefit to the seller. In general, they pay their sellers a very high commission for the sale of these additional contracts.
