Over 30 years, a 1% annual fee takes 14,891 from 10,000 growing at 6% a year: the balance ends at 42,544 instead of 57,435.
The fee is charged on the whole balance every year, not only on the gains, so it takes a little more each year as the balance grows. Both balances below start from the same amount and earn the same 6% before fees, with nothing added along the way.
The gap over time
The balance with and without the fee, and the difference between them:
| After (years) | No fee | 1% annual fee | Taken by the fee |
|---|---|---|---|
| 10 | 17,908 | 16,204 | 1,705 |
| 20 | 32,071 | 26,256 | 5,816 |
| 30 | 57,435 | 42,544 | 14,891 |
What the example leaves out
These figures assume the same return every year and a fee charged as a share of the balance. Real funds differ: returns vary from year to year, and fees can be charged in other ways or alongside other costs.