A rounding error, compounded

Every fund charges an annual expense ratio, taken quietly from the balance rather than billed to you. Quoted in hundredths of a percent, it reads as nothing.

But it is charged on the whole balance every year while that balance compounds, and it comes out of your return rather than your principal. The right comparison is not 0.5% against your savings, it is 0.5% against the 7% the market gave you. This is also the only variable in retirement planning you can change this afternoon.

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