Retired Nurse, 68, Pays Nearly $22,000 A Year In Investment Costs. Her Son Says It's Too Much

Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below.

A 68-year-old retired nurse has told friends for years that she pays her financial adviser “just 1%.” Then her son, a CPA, spent a weekend reviewing her account statements, fund prospectuses and variable annuity contract. His tally came to $21,700 in annual costs on her $1.1 million portfolio, or nearly 2%. He told her she was “getting bled dry.”

She likes her adviser and doesn’t want to start over. Her son thinks she is paying far too much.

Both have a point. The adviser’s 1% fee may be only one part of the cost of investing. Fund expenses and variable annuity charges can add thousands more each year, even when they aren’t billed separately. Before she changes anything, though, she needs to understand exactly what she’s paying for—and whether the products and services still fit her needs.

Based on her son’s calculations, the difference between a 1.97% annual cost and a 1% all-in cost on $1.1 million could amount to roughly $146,000 over 10 years, assuming a 5% annual return before fees, no withdrawals, no additional contributions and steady annual costs. That’s an illustration, not a guaranteed loss or savings figure.

Don’t Miss:

Where Is The Money Going?

About $800,000 sits in an advisory account. The 1% management fee costs $8,000 a year, assuming the full balance is subject to that rate. The mutual funds inside the account have average expense ratios of 0.85%, adding another $6,800 in annual fund expenses.

The other $300,000 is invested in a variable annuity she purchased a little over three years ago. According to the contract figures her son reviewed, the annuity has a 1.25% mortality and expense risk charge, a 0.15% administrative fee and underlying fund expenses of 0.9%. Together, those charges total 2.3%, or about $6,900 a year on a $300,000 balance.

That brings the combined annual cost to $21,700:

Advisory fee: $8,000
Mutual fund expenses: $6,800
Variable annuity charges: $6,900
Total: $21,700, or about 1.97% of the portfolio

These figures assume the balances and fee rates remain unchanged. Her actual costs may fluctuate with account values and contract terms, and she should verify that the figures don’t double-count any charges.

The SEC’s guide to variable annuities explains that these products can carry insurance, administrative and underlying investment expenses. Some contracts also charge extra for optional benefits.

Why Didn’t She See It On Her Statements?

Some investment costs don’t show up as a separate bill. Mutual fund operating expenses are deducted from fund assets, reducing investment returns. Variable annuity charges may also be deducted from the contract’s value, while an advisory fee may appear separately on an account statement.

The SEC’s investor bulletin on fees and expenses explains that investors can pay several kinds of ongoing fees at once. It recommends reviewing account documents, fee disclosures, fund prospectuses and other investment paperwork to understand the total cost.

A 1% advisory fee can therefore be accurate without representing the full cost of owning the investments. The question is whether the combined fees are reasonable for the services and products she receives.

The long-term impact can be substantial. The Department of Labor’s guide to 401(k) plan fees illustrates how a 1 percentage point difference in annual fees can reduce an account’s projected value by 28% over 35 years under its assumptions. That example concerns a retirement plan, but the broader lesson applies to investment costs: money spent on fees is money that no longer remains invested.

Trending: There’s More Than One Way To Put Cash To Work. Some Accredited Investors Are Looking Beyond Savings Accounts.

Should She Get Out Of The Annuity?

Not without reviewing the contract first.

Variable annuities can include surrender charges if an investor withdraws money during a specified period. The SEC’s variable annuity guidance gives an illustrative schedule that begins at 7% in the first year and declines by one percentage point annually. But that is an example, not a universal schedule.

Because she bought the annuity a little over three years ago, she should check the contract’s actual surrender schedule, whether the charge applies to the full balance or only certain withdrawals, and whether some amount can be withdrawn without a penalty. The timing of payments into the contract may also matter. She should not assume she owes 4%—or $12,000—to exit today without confirming those details.

She should also understand what the annuity provides. Depending on the contract, it may offer guarantees or optional benefits that have value to her, although those features may carry additional fees. The question is whether the benefits justify the costs compared with alternatives.

If the annuity is held inside a traditional IRA, she should ask why she needs an annuity’s tax deferral when the IRA already provides tax-advantaged treatment. That doesn’t automatically make the annuity inappropriate: guarantees and other contract features may still matter. But she should understand the reason for holding it and compare the costs with the benefits before deciding whether to keep it, exchange it or surrender it.

A lower-cost alternative may be worth exploring, but an exchange or surrender can have consequences. She should get the insurer’s terms in writing and review the options with an independent professional before making a decision.

Is A Lower-Cost Setup Realistic?

For the $800,000 advisory account, one potential cost-saving step is to review the mutual funds’ expense ratios. If suitable broad-market index funds with expenses below 0.1% could replace funds averaging 0.85%, the difference would be roughly $6,000 a year on the current balance.

That doesn’t mean every actively managed fund should automatically be replaced. The new investments should fit her risk tolerance, income needs and broader retirement plan, and the adviser should explain any trading costs or tax consequences.

There is also a documented reason to ask whether lower-cost share classes are available. In 2019, the SEC announced that 79 investment advisers would return more than $125 million to clients as part of its Share Class Selection Disclosure Initiative. The cases involved advisers who failed to adequately disclose conflicts related to recommending higher-cost mutual fund share classes when lower-cost versions were available. The announcement doesn’t establish that her adviser has done anything similar, but it shows why comparing share classes and asking about conflicts is worthwhile.

She can ask her adviser to review each holding and explain whether a lower-cost share class or alternative investment could serve the same purpose. She should also ask whether the adviser receives compensation or other benefits tied to particular investments.

See Also: The Next AI Winner Might Not Be A Chip Company. It Could Be The Companies Powering The Data Centers.

How Can She Keep The Adviser And Cut Costs?

She can start by asking for a written, all-in fee breakdown in dollars. That should show the advisory fee, each fund’s expense ratio, annuity charges and any additional costs, along with the services she receives for the advisory fee.

The SEC’s Form CRS guidance explains how relationship summaries help retail investors compare firms’ services, fees and conflicts of interest. Form CRS includes questions to ask, such as: “If I give you $1,000 to invest, how much will go to fees and costs, and how much will be invested for me?”

She can ask her current adviser to review the portfolio for lower-cost fund options and explain the annuity’s purpose, guarantees and surrender terms. She should also ask for a written plan showing how the adviser’s recommendations would affect her total costs.

If the adviser responds with clear explanations and a practical plan, she may be able to improve the arrangement without ending the relationship. If the answers are vague or the adviser cannot explain why the products are appropriate, getting a second opinion could help her decide what to do next.

What Does A Second Opinion Cost Her?

A second opinion may involve a fee, so she should ask about the cost before scheduling a review. Some advisers offer an introductory consultation, while a detailed portfolio or annuity review may be billed hourly or at a flat rate.

A qualified independent adviser can review the annuity contract, check the surrender schedule, evaluate the underlying funds and compare the current arrangement with alternatives. She should ask whether the reviewer has any conflicts or compensation tied to recommending a particular product.

AdviserMatch can connect her with financial advisers who may help her compare services and fees. She should confirm each candidate’s qualifications, compensation and scope of service before hiring anyone.

She doesn’t have to choose between blindly trusting her current adviser and firing them immediately. First, she needs a transparent accounting of what she’s paying, what she’s receiving and which costs can reasonably be reduced. Then she can decide whether the relationship still earns its place in her financial life.

Building Wealth Across More Than Just The Market

Building a resilient portfolio means thinking beyond a single asset or market trend. Economic cycles shift, sectors rise and fall, and no one investment performs well in every environment. That’s why many investors look to diversify with platforms that provide access to real estate, fixed-income opportunities, precious metals, and even self-directed retirement accounts. By spreading exposure across multiple asset classes, it becomes easier to manage risk, capture steady returns, and create long-term wealth that isn’t tied to the fortunes of just one company or industry.

EquityMultiple

For accredited investors looking beyond stocks and bonds, EquityMultiple provides access to vetted commercial real estate deals starting at $5,000, with only ~5% of opportunities passing their due diligence process.

Arrived

Backed by Jeff Bezos, Arrived Homes makes real estate investing accessible with a low barrier to entry. Investors can buy fractional shares of single-family rentals and vacation homes starting with as little as $100. This allows everyday investors to diversify into real estate, collect rental income, and build long-term wealth without needing to manage properties directly.

Skybound Entertainment

Entertainment franchises can become valuable long-term assets when they successfully expand across multiple platforms. Skybound Entertainment, the company behind The Walking Dead and Invincible, develops original intellectual property that spans comics, television, film, video games, merchandise, and licensing. With more than 250 IPs in its portfolio and a strategy focused on retaining franchise rights while scaling successful stories across media, Skybound offers investors exposure to the growing entertainment and creator economy through a private company rather than traditional public market investments.

American PowerGen

As artificial intelligence drives a surge in electricity demand, reliable power generation is becoming a critical part of the technology ecosystem. American PowerGen is developing natural gas-fired power plants in Texas, a fast-growing market fueled by AI data centers, manufacturing expansion, and population growth. By advancing projects through permitting, fuel supply, and grid interconnection, the company is positioning itself to help meet rising energy needs while offering investors exposure to the infrastructure supporting the next wave of AI and industrial growth.

Bito

As AI coding tools take on more of the work traditionally done by developers, companies are facing new challenges around code quality, context and the rising cost of AI-powered development. Bito is building software designed to help AI coding agents better understand complex codebases while helping companies control AI development costs. Founded by former PubMatic executives, Bito has raised more than $10 million from institutional and individual investors and is now raising additional capital through a Wefunder offering, giving investors an opportunity to invest in a company targeting an emerging need within the rapidly expanding AI software market.

DLP Capital

For accredited investors looking beyond stocks and traditional real estate opportunities, DLP Capital provides access to private real estate strategies focused on workforce housing — homes for essential workers such as teachers, nurses, firefighters, and police officers. With more than $5.5 billion in assets under management and a community of 4,000+ accredited investors, DLP Capital gives investors access to real estate strategies designed around the growing need for housing that working Americans can actually afford.

FarmTogether

Farmland has historically held its value through market volatility and delivered returns uncorrelated to stocks and bonds. For accredited investors, FarmTogether offers direct access to high-quality U.S. farmland starting at $15,000 — fully managed, with no landlord headaches.

Fundrise

Private real estate and private credit can add income and stability to a stock-heavy portfolio. Fundrise offers access to diversified private real estate and credit strategies through an easy-to-use platform, with professionally managed portfolios designed to generate passive income and long-term growth.

This article Retired Nurse, 68, Pays Nearly $22,000 A Year In Investment Costs. Her Son Says It’s Too Much originally appeared on Benzinga.com

Retired Nurse, 68, Pays Nearly $22,000 A Year In Investment Costs. Her Son Says It’s Too Much

Tags: