How 1% can cost you millions (12 7 25)

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You think 1% is a small fee or a negligible difference in annual returns? Think again. Over a 40-year investing career, that tiny percentage can compound into a multi-million-dollar loss. Today, we break down the shocking math and reveal the three "small" mistakes that make a huge difference in your nest egg.

Here’s what we’re covering in today’s Clark Smart Investing newsletter:

• How 1% can cost you millions

• Year-end tax moves worth your time

• Clark's verdict: The Vanguard Cash Plus Account

• Q&A: How often should you revisit your financial plan?

• Smart money move of the week

💵 How 1% Can Cost You Millions

When you’re young and just starting to invest, a percentage point or two doesn’t sound like much. What’s the real difference between earning 8% versus 9% annually? Or between paying 0.5% in fees versus 1.5%?

The answer might shock you.

What $1,000 Per Month Can Become

Let’s look at what happens when you invest $1,000 per month from age 25 to 65, a solid, achievable goal for many workers. Forty years of consistent investing deliver vastly different results at different annual returns. Here’s what your investment balance looks like at different rates of return.

• 4% return: $1,181,961

• 5% return: $1,526,020

• 6% return: $1,991,491

• 7% return: $2,624,813

• 8% return: $3,491,008

• 9% return: $4,681,320

• 10% return: $6,324,080

• 11% return: $8,600,127

• 12% return: $11,764,773

The difference between 4% and 5%? That’s $344,059.

The difference between 9% and 10%? Nearly $1.65 million — that 1% is more than your entire retirement balance would be at 5%.

Notice how a single percentage point becomes dramatically more valuable as returns increase.

Are you losing $1 million, $2.8 million, or even $3.7 million through a seemingly harmless financial decision right now? The full article unveils the three insidious and common traps that are quietly turning a single percent into a seven-figure retirement disaster — and the guidelines you should follow instead.

📚️ Recommended Reading

✅ Poll: What’s Your Take?

Every week, we'll ask a new question to get your take on the latest financial trends and topics.

Last Week’s Poll Results

We asked: “How do you feel about owning a second home?” Here’s how you answered:

• I have never had one, and I do not want one (59.0%)

• I want one (I don't have one yet) (13%)

• I got one and regret it (7%)

• I have one and have no regrets (21%)

💬 Ask an Advisor

In this recurring Q&A, we share questions that have been answered by Clark Howard or Wes Moss on the podcast. Submit your question today!

Brian in California asks: My wife and I are retired and around 60 years old. We worked with a financial advisor two years ago and had a great experience. It was a one-time project. How often should we have our plan updated with the advisor to ensure we can spend more if needed?

Wes Moss says: I believe the simple answer is that financial planning should be reviewed at least once a year, especially since it sounds like it has been a couple of years. A strong stock market often lulls people to sleep regarding their planning; when portfolios are growing significantly and spending remains stable, there's less worry. However, if you start considering materially increasing your spending, that changes the whole plan. The original plan, and most financial plans, likely already accounted for standard inflation of about 2.5% to 3% annually, meaning a 7% to 8% spending increase over the last couple of years might already be "baked in." But if you don't know that, it's a good sign that you need to revisit the plan. If the market has performed exceptionally well and you feel significantly ahead of schedule — perhaps wanting to fund a big project—then this is the time to utilize those gains. Therefore, you should absolutely revisit your plan, perhaps on an ad-hoc basis, and essentially act as though you’re retiring again tomorrow to confirm your new spending goals are feasible.

💸 Money Tip of the Week

☎️ Need Money Help?

The Team Clark Consumer Action Center is a free helpline that can help you navigate your money questions. Call 636-492-5275. Visit clark.com/cac for more information.

This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Any company names shown are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.

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