Ask Liz Weston

Get smart with your money

costs

What caring for an aging parent could cost you

By

Trying to work while caring for an aging loved one can be difficult, stressful and at times overwhelming. Many people feel they must quit, take a leave of absence or at least reduce their hours in order to cope.

Sometimes, caregivers have little choice. But often people don’t realize the heavy financial toll they’ll pay or adequately research options that could allow them to keep working, says Amy Goyer, AARP’s national family and caregiving expert.

“When you’re in a caregiving crisis, you can make a decision out of stress and fatigue and fear,” Goyer says. “It’s important to make work decisions and financial decisions from a more objective place.”

In my latest for the Associated Press, a look at how to manage the costs.

High fees can break your nest egg

By

Dear Liz: We have $130,000 invested in mutual funds, but the returns the last few years have been less than 4%. With the financial advisor taking 2% as a fee annually, we are not satisfied with the growth. A co-worker suggested buying blue-chip stocks with a strategy to hold and reinvest the dividends. If this is done in a self-directed plan to avoid the fees, we could be netting 4% plus. Is this a good plan or should we trust the advisor’s optimism that our returns will improve soon?

Answer: You don’t mention your age, your investment mix or your goals for this money. But if your portfolio isn’t doing significantly better this year — after all, the Standard & Poor’s 500 stock market benchmark is up about 30% over the last 12 months — you have cause for concern.

Even if your returns were better, a 2% fee is pretty high. Small investors need to keep an eagle eye on costs, since expenses can have a huge effect on your nest egg. Paying even 1% too much could shave more than $100,000 off your returns over the next 20 years.

That doesn’t mean, however, that an all-stock portfolio is a better choice. Individual stocks typically are much riskier than a diversified portfolio of mutual funds or exchange-traded funds (ETFs).

What might make more sense is consulting a fee-only financial planner who can design a low-cost portfolio for you. You can get referrals to planners who charge by the hour at http://www.garrettplanningnetwork.com.