84 • MARTIN H. RUBY
is 1.4 percent. For a plan with more than one hundred employees, it’s 1.03 percent. 18 That fee is charged on your funds every year as you’re working and contributing money, and when you’re retired and drawing down money. If you are in a 401(k) plan, not only are you paying an adminis- trator to manage the 401(k) plan itself, but every time you put money into a mutual fund you have an additional set of fees you’re paying. What do those fees buy you? Well, you get access to mutual funds, and some investment advice. In an IUL policy, you pay a cost of insurance fee and general expense fees. For these fees, you get some real benefits: a death benefit, tax-free savings growth and, of course, the power of index- ing to grow your funds over time. Sure, you’re thinking, you get a lot for those fees. But the fees are still so high! That’s What Neil Thought If you’ve read my first book, you may remember this story. I’m including it again because it’s such a compelling one. Neil, a team member in my office, came to us from the world of managed money. His background is in investing, and he didn’t trust life insurance as a savings vehicle. Why, you might ask? He had always been told it was too expensive. When he started working with us, he always came back to cost: “But how can we recommend something with such high fees?” I wasn’t convinced the fees were so high. Being an actuary, I decided to look at the numbers. First, I wanted to compare apples to apples. In a managed ac- count like an IRA or 401(k), fees tend to stay uniform as a
18 Robert Powell. MarketWatch. Aug. 10, 2010. “No free lunches, no fee-free IRAs.” http: // www.marketwatch.com / story / no-free-lunches-no-fee-free-iras-2013-08-10.
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