MERQ: The Big Impact of Seemingly Small Investment Fees

Michael Wiener shares the two retirement spending mistakes he sees Canadians make most often.

💈💈💈

You must be proud that in the last five, maybe seven years, all of a sudden people are paying a lot more attention to fees. We have a lot of charts being put out about what the extra 2% a year can do to your returns, because you’ve been talking about it forever and highlighting the fact that it’s truly a huge deal.

And, you know, if you’re dollar cost averaging in over, let’s say, a 30 to 40-year period, it can make the difference of 30, 40, 50% of how much capital you end up with down the road. It’s absolutely enormous

Yes, and, you know, the the focus on just talking about one year’s fees really is tough for a lot of people. So I’m proud of the fact that a lot of people seem to be, uh, learning this lesson, but there are a ton of people out there who aren’t. They just hear 1, 2%, it sounds like nothing to them.

You know, they, they pay the real estate agent more than that. But this compounds year after year after year, so I like to focus on 25 years. So I call it my MERQ instead of just the MER. And so 2% sounds more like 39, 40%. And that, when you tell people 40% of your money is gone after 25 years, well, to begin with, they don’t believe it.

But if you can get them to believe it, it sounds impressive and, and bad.

You know, and the funny thing is, I think over 25, 35, 40-year periods, it could even be worse over the next extended stretch because we’ve had very high market returns. But if you have lesser market returns, then that fee is eating a higher percentage of those returns. And so that problem could be exasperated

Yeah, it, it could certainly get a lot worse. Uh, I mean, you know, you, if you can, if you’re making tons in the market like we have over the last, you know, 10, 15 years, it’s not as painful to say, “Well, I could have had a lot more.” But, you know, when you’re not making much and, and you’re starting to struggle a little bit, having money taken away is a big problem