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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 to focus more on controlling your expenses.
In a recent Senior Citizens League survey, 94% of respondents said the 2025 cost-of-living adjustment to Social Security was not enough to keep up with their actual expenses (1).
Additionally, 52 percent of American seniors on Social Security said they are cutting back on discretionary items like dining out and travel because the cost of living exceeds their benefits, according to a Nationwide survey (2). More than 30% said they were cutting back on even essentials like food and medicine.
However, there’s one big expense that’s rarely mentioned and could be one of the easiest to cut without affecting your lifestyle: investment fees.
Here’s why this silent drain 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 might seem like a smart move on paper, especially if the targeted returns outweigh the price.
First, the fees usually sound deceptively low. The average expense ratio for all US active funds was 1% in 2024, according to Morningstar (3).
Meanwhile, professional financial advisors typically 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 post-fee performance of many of these funds and strategies may fail to live up to the hype.
Legendary investors like Warren Buffett echo this sentiment.
“Costs really matter in investing,” Buffett said during an interview with CNBC in 2017 (5).
“If the returns are going to be 7 or 8 percent and you’re paying 1 percent in fees, that makes a huge difference in how much money you’ll have in retirement.”
Only 33% of actively managed mutual funds and exchange-traded funds (ETFs) survived and outperformed their passive average over the 12 months to June 2025, according to Morningstar (6).
“The paper shows that the unmanaged index fund will do pretty well over time, and active investing as a group can’t beat it,” Buffett said in the same interview.
Moreover, since the fee is usually proportional to the assets under management, it will only increase as your portfolio grows.
According to the Morningstar report: “Headlines about the superiority of active managers in navigating turbulence often decorate market declines. The data rarely supports this, at least for the average active manager.”
Simply put, these expenses are avoidable. And cutting them could save you a lot of money in retirement. That’s why billionaire investor Warren Buffett recommends that average investors stick to low-cost index funds.
Read more: Warren Buffett used 8 solid, repeatable rules to turn $9,800 into a $150 billion fortune. Start using them today to get rich (and stay rich)’
Cutting even a few basis points off your investment fees could make a big difference in the long run.
To understand this, say you retire with $1 million and put the money into an actively traded mutual fund with a 1% fee. Your tax expense is $10,000. Meanwhile, based on Morningstar data, you’ll be lucky if that actively managed fund even matches the performance of its cheaper, passive counterpart.
For example, you could invest the same million dollars in a low-cost passive fund like the Vanguard S&P 500 ETF ( VOO ) with an expense ratio of just 0.03%. Your fee for a single year is only $300 and the performance is probably as good, if not better, than the actively managed fund.
Assuming equal performance, you would pay $9,700 more for the active fund in a single year. This is the cost of a nice vacation. Over several years of combined and opportunity costs, this could drain tens of thousands of dollars from your net worth.
And the best thing about reducing investment fees? It is easy to remove and requires no lifestyle adjustments.
With platforms like Robinhood, you can invest in ETFs like the Vanguard S&P 500 to start growing.
Robinhood has 24/7 support and you won’t pay commissions for stocks, ETFs and options. Their platform also offers both a traditional IRA and a Roth IRA so you can benefit from tax-efficient retirement investments.
New Robinhood customers can also get a free stock after you register and link your bank account to the app.
You can choose your stock reward from top US companies with amounts ranging from $5 to $200.
High net worth individuals often have more complex financial needs. As your wealth grows, so do the layers of financial advice you need—and the fees that come with it. If you consult separate experts for taxes, investments and estate planning, those bills can add up faster than you think.
If that sounds like you, another option is to work with the investment and tax experts at Range.
The range is adjusted for households earning at least $300,000 or individuals earning at least $250,000. Given their flat fee structure and 0% AUM in fees, this could make them an attractive option to represent your path to wealth.
With Range, you have access to a team of advisors who can support you with financial planning, tax (including estate administration), equity compensation and estate planning – all under one roof.
And the best part? You can book a free demo to get started and see if the comprehensive Range package fits your financial goals.
Even better, as a Registered Investment Advisor (RIA), Range is required by law to make recommendations with your best interest in mind.
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