The other night I was putting together my desk. We recently move to a new house, and I had to take apart this giant desk. Putting it together was tricky, because I had to remember where all the pieces fit together. When I had finally lined everything up, I noticed that the center section of desktop was off by at least an inch.
I have one of those big, U-shaped desks. I had connected the lower part of the U shape, bridging the two sides together. This vertical piece was the main support for the desk component that would sit on top. As I placed the desk component on top, it seemed alright on the near side, but was off by more than an inch on the far side. That wouldn’t do!
So I took the top off and looked everywhere. I noticed that I had gotten the furthest bolt lined up, but had completely missed the second bolt. It was outside the support piece. This had to the reason! No wonder the cam lock never caught on to the bolt.
It seemed strange that being off by what was less than 1/4″ could have cause the opposite end to be off by such a big amount. But I went back and fix it so both bolts were properly locked on in that support piece. Then when I dropped in the desktop, it lined up perfectly. That’s when I remembered how small variations at one end become magnified the further away you get.
The same can be said about wealth building plans. Something that may seem like a small impact today can have a huge effect on your total growth in a twenty five year span. Studies have already shown that the exorbitant fees of 401K can end causing you to lose an average of 30% (or more) of your total growth.
Something small like 4% vs 1% fees in your 401K can have a detrimental effect long term. In one study, they showed that $155,000 on average was lost to high fees, which could equal an entire house in today’s dollars. With that much money, I could easily see buying another half-of-a-duplex and getting an additional $1300/month in cash flow. Think you could use that?
But who pays attention to 401K fees? Not many, I’m afraid. Most people don’t watch small stuff like that. Instead, they check if their value is growing or shrinking. When values plummet, people suddenly get interested and start moving their holdings into more conservative funds. This locks in losses, but the same fees are found in the other funds as well. This insidious issue continues unabated until its too late, when you are thinking about retiring. You want to, but discover there isn’t enough money, or at least not enough to retire completely. Instead, you need to find some other supplemental income.
That is what happens when your plan is out of alignment and not handling things like high fees, inflation, and complex rules surrounding 401K.