What are fees actually costing you?
A 1% charge sounds small. Over thirty years it is not. See the figure in money rather than percent.
A broad index tracker often lands near 0.2% all in.
Actively managed funds and advised platforms are often above 1.5%.
More options(2)
Both options are given the same gross return, so the only difference is the charge.
The difference between 0.2% and 1.5% a year
$93,018
Over 30 years, the more expensive option ends up $93,018 smaller — that is 23% of the final pot, gone to a charge that reads as 1.3% a year. The charge applies to your whole balance every year, and it takes both the money and everything that money would have earned afterwards — which is why a difference of 1.3% a year ends up costing 23% of the pot rather than anything close to 1.3%.
- At 0.2% a year
- $410,135
- At 1.5% a year
- $317,117
- Share of the pot lost
- 23%
The same figure, said three ways
- The charge is 1.3% a year.
- Over 30 years it takes 23% of what you would otherwise have.
- In money, that is $93,018 — about 310 months of your own contributions.
Why a percentage is the wrong unit
A fee quoted as 1% invites you to compare it against 100% and conclude it is small. That comparison is the wrong one, and the wrongness is structural rather than accidental.
The fee is charged on your whole balance, every year, whether the balance went up or down. Your return, meanwhile, is what you are actually there for. So the honest comparison is fee against return: 1% against 7% is not one percent of anything you care about — it is roughly a seventh of your growth, handed over annually.
Then it compounds. The money taken in year one is not just gone; it is gone along with everything it would have earned in the twenty-nine years afterwards. That is why the wedge in the chart above starts as a hairline and ends as a canyon, and why the share of your final pot lost to a 1.3% difference is typically far more than 1.3%.
What counts as a fee
Add these together before typing a number in:
- The fund charge — the ongoing charge figure or expense ratio, deducted inside the fund before the price you see. You never receive a bill for it, which is precisely why it goes unnoticed.
- The platform charge — what the broker or provider takes for holding the account, often a percentage of assets, sometimes a flat annual fee.
- Adviser fees, if any, usually an annual percentage on top of both of the above.
- Transaction costs and spreads, which do not appear in the headline figure but are real. They are hard to pin down; if you trade rarely they are small.
The longer explanation is here, including why two funds tracking the same index can charge very different amounts for producing nearly identical results.
What this comparison assumes
Both options are given the same return before fees. That is the assumption doing the work, and it is worth being explicit about it: this page is not claiming cheap funds return more than expensive ones before costs. It is isolating the effect of the charge alone, holding everything else equal, so you can see what the charge by itself costs. Whether a more expensive option earns back its fee is a separate question this site has no opinion on.
Common questions
Is 1% a year really that bad?
Where do I find what I am actually paying?
Does the calculator handle flat annual fees?
Not advice. This tool applies arithmetic to assumptions you entered. It does not know your circumstances, your tax position or your goals, and it is not a recommendation to buy, sell or hold anything. Past returns do not predict future ones, and no figure here is a forecast.