Many Americans preparing for retirement through savings and investments often encounter significant financial hurdles as they work toward a secure and enjoyable future.
They eventually come to realize that while Social Security provides a foundational stream of income, it was never designed to fully support every cost of living throughout the entirety of retirement.
According to renowned motivational speaker and author Tony Robbins, although 401(k) plans offer valuable opportunities, workers frequently encounter scenarios that could jeopardize their long-term financial well-being.
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Regularly contributing to retirement accounts that offer tax advantages — such as 401(k) plans and Individual Retirement Accounts (IRAs) — is a smart financial strategy.Â
Taking full advantage of these contributions, particularly with regard to 401(k) plans when an employer match is available, can greatly enhance retirement savings over the long term.
Robbins has emphasized the importance of financial awareness when it comes to retirement planning. One of his key messages is a warning to American workers regarding misconceptions about Social Security and 401(k) plans.
Related: Jean Chatzky sends strong message to Americans on Social Security
A crucial part of effective retirement planning certainly involves understanding how Social Security benefits are determined and carefully choosing when to begin claiming them. By postponing benefits beyond one’s full retirement age, retirees can receive higher monthly payouts from the program.
Considering this background, Robbins highlights a critical caution about how 401(k) plans are used — urging workers to avoid common pitfalls that could affect their financial futures.
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Tony Robbins warns Americans about 401(k) fees
Tony Robbins points out that for three decades, companies managing 401(k) plans were not required to reveal how much they were charging in fees.Â
Now that disclosure is mandatory, he believes many providers hide those costs in lengthy, complex documents — making it hard for individuals to truly grasp what they’re paying and keeping them largely uninformed.
“What the majority of Americans don’t realize is that an increase in 1% in fees will cost you 10 years in retirement income,” Robbins wrote.
More on retirement:
- Dave Ramsey offers urgent thoughts about Medicare
- Jean Chatzky shares major statement on Social Security
- Tony Robbins has blunt words on IRAs,401(k)s
Robbins uses a straightforward hypothetical scenario to underscore the long-term impact of investment fees on retirement savings.Â
In his example, three employees — let’s call them Employee 1, Employee 2, and Employee 3 — each invest $100,000 at age 35 into separate mutual funds. All three investments generate the same steady annual return of 8%, and none of them withdraw any funds for 30 years.
However, each employee is subject to a different annual fee: 1%, 2%, and 3%, respectively.
By the time they reach age 65, Robbins clarifies, the variation in fees has created a striking difference in their account balances.Â
Despite identical contributions and returns, Employee 1, who paid the lowest fee, has nearly double the retirement savings of Employee 3, who paid the highest.
Related: Dave Ramsey sends strong message to Americans on Medicare
Robbins explains more financial costs of varying 401(k) fees
Robbins emphasizes that the cost of high investment fees doesn’t end at retirement.Â
Using the scenario of each employee needing $60,000 annually to fund their retirement, he notes that the long-term consequences become even clearer.
The employee facing the highest fees — Employee 3 — depletes their savings before reaching 75, while Employee 1, who paid the lowest fees, sees their nest egg last until age 95.
According to Robbins, this stark contrast demonstrates how even small differences in fees can compound into significant financial disparities.Â
It’s a powerful reminder, he says, that being mindful of investment costs isn’t just a matter of saving money — it’s a crucial step in safeguarding long-term financial security.
“I learned about these abuses while writing ‘Money: Master the Game,’ and it made me so angry that people were getting robbed blind,” Robbins wrote. “So I brought in America’s Best 401(k).”
America’s Best 401(k) is a retirement plan provider that says it aims to reduce the high fees commonly associated with traditional 401(k) plans.
Robbins asked the firm to asses the 401(k) plan used by his own research company and ended up using their proposed solution.
“They showed me that we were paying 276% more than we needed to for the same exact stocks,” Robbins wrote. “It saved my employees $5 million in their retirement, and it cost nothing.”
Related: Shark Tank’s Kevin O’Leary warns Americans on 401(k)s
