Your advisor is a really nice person, and the office manager of the financial firm you do business with is really nice also, and those mutual funds you were sold by your advisor are also managed by really nice people. But this isn't a reason to give these people \$1 million extra over your lifetime.

I'm not talking about the money these firms may get from government tax breaks or business incentives. I'm talking about you, personally, handing over a cool million dollars to advisors, brokers and fund managers over your lifetime. It's not necessary. It's a waste of money.

Wrap Account Ripoff

And after you realize that it's too late for you to save the whole \$1 million, tell your children and grandchildren not to give away their money.

How does it happen that most investors give away a large chunk of their wealth to Wall Street? Well that's the sum total of excess fees, commissions and other investment expenses that a typical couple pays over their lifetimes. (For background reading, check out What You Get When You Pay For Investment Services.)

Let's do the math. Assume a young man and woman get married and enter the workforce at age 22. Their starting pay in the workforce is \$40,000 each per year. Every year each gets a 5% raise and both work until age 65. The couple religiously saves 10% of their salaries every year in a retirement account. How much does the couple have for retirement at age 65?

Their nest egg will depend on their rate of investment return. Here are three possibilities:

• 5% return grows to \$2.67 million.
• 6% return grows to \$3.28 million.
• 6.5% return grows to \$3.65 million.

There's a \$1 million difference between the 5% return and the 6.5% return. That's 37% more at retirement from earning 1.5 percentage points more each year! So if the couple could increase their return by 1.5 points per year, this would add an extra \$1 million to their retirement account at age 65, and even more if they live a long life in retirement.

How does the couple increase their return 1.5 points? Easy - cut costs by 1.5 points. Don't invest with advisors who charge exorbitant fees and commissions, and dump the high-cost mutual funds for a portfolio of Vanguard index funds or ETFs. The fees are much lower than the typical actively managed fund and there is no brokerage commission going to brokers to buy shares. (For more insight, read The Lowdown On Index Funds.)

If you feel you need the advice of a professional, hire someone who'll charge a couple hundred dollars per hour for advice. You could start your search for an hourly fee-only advisor at the Garrett Planning Network, an organization composed of mostly fixed-fee advisors.