April 24, 2013 – If you caught last night’s “The Retirement Gamble” documentary, you can likely understand it generated some criticism in the retirement industry.
The stated aim of the Frontline documentary, which aired April 23 on PBS, was to examine how financial institutions protect retirement savings, as well as look at participant-related fees. Critics, however, said it did not capture an accurate snapshot of the American retirement system.
Some sources in the documentary say America’s retirement system weaves a complex web of fees that can drain a participant’s retirement account. An example from Jack Bogle, Vanguard’s founder, shows that if a participant is invested in a fund earning a gross annual return of 7% and he is charged a 2% annual fee by the investment company, over 50 years the participant will have lost about two-thirds of his earnings to fees.
“What happens in the fund business is the magic of compound returns is overwhelmed by the tyranny of compounding costs,” he said in the documentary. “It’s a mathematical fact. There’s no getting around it. The fact that we don’t look at it? Too bad for us.”
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