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Other than simply not socking away enough money for the future, there's a less-obvious reason why Americans don't save enough: They are getting clobbered by often-hidden fees.

For most investors, credit customers and savers, fees are a nasty fact of life, so they ignore them, even though they consistently and silently eat away their savings. Fortunately, most of these noxious expenses can be avoided.

According to new research by NerdWallet, Americans vastly underestimate the amount of fees they'll pay on investment and banking accounts. By their estimate, Americans could be paying more than $300,000 over their lifetime.

Surprisingly, though, those surveyed said they'd only pay roughly $2,000 in fees. What accounts for the huge gap? Most investors don't check to see how much they are being charged for money management, late fees or finance charges. They don't read the fine print.

And here's the ironic part: If you aren't paying those fees, you could invest the money and reap up to $1 million over your lifetime. That could form the core of a retirement account. Here are some more details from the survey:

-- Almost 7 in 10 American adults (68%) say they’ve incurred a fee on an investment or bank account, and nearly half (48%) have incurred an unexpected fee.

-- Among those who have incurred any fees, over a quarter of them (27%) always just pay the fee instead of taking action to get it resolved.

-- Millennials (ages 22-37) are less likely than Baby Boomers (ages 54-72) to have money in a bank account (80% vs. 95%) or investment account (47% vs. 67%), but Millennials are more likely to report that they’ve incurred a fee on an account (73%, compared to 64% of boomers).

What You Can Do

There's much you can do to avoid fees. Here are the simplest courses of action:

-- When shopping for a checking account, always look for the "no-fee" option. Local banks and credit unions are good places to start.

-- Always know what's going to trigger a late fee or finance charge on your credit card. All cards give you a "grace period" in which you can pay your balance in full without incurring any fees.

-- Avoid rolling over credit-card balances. That will only rack up more interest and fees.

-- Avoid your credit card's minimum payment. Pay your balance in full each month to avoid finance fees. Spend within your means.

-- Always check the "expense ratio" of any mutual fund or exchange-traded fund you buy. The best ratio is zero, which is available on many bond and money-market funds. Fidelity Investments is now offering zero expense ratio index funds, for example.

-- Always check expense ratios on funds within your IRA and 401(k) plans. Index funds are generally the cheapest. The closest they can get to zero, the better. Great low-cost funds are offered by BlackRock (iShares), State Street (SPDRs), Schwab and Vanguard.

The bottom line is to avoid getting gouged by a bank or investment firm. Carefully vetting fees will help you save thousands over time.

Credited to Forbes

Posted 1:13 PM

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