Should You Pay 1% of Your Portfolio Every Year?

For many retirees, a 1% AUM fee is worth questioning. Once you are drawing down rather than accumulating, your portfolio is typically near its peak, which means the dollar amount of a percentage fee is also often near its peak. The planning work involved in retirement, Social Security timing, RMDs, Roth conversion windows, Medicare coordination, and tax-efficient withdrawal sequencing, generally does not scale with your balance. Whether a flat fee or an AUM fee makes more sense depends on your specific situation, but the fee structure is worth examining carefully at this stage of life.

For most retirees, paying an assets under management fee — also called an AUM fee — is worth questioning once you stop accumulating and start drawing down. Your portfolio is typically near its lifetime peak at retirement, which is exactly when a percentage-based fee costs the most in dollar terms. The planning work involved in retirement generally does not scale with your balance, so whether the fee you are paying reflects the work you are receiving is a fair question to ask.

If you are retired, or close to it, you have probably heard that most financial advisors charge an AUM fee of around 1% of your invested portfolio per year. According to Kitces Research’s 2024 advisor fee survey of 621 advisory firms, the median assets under management fee runs roughly 1.00% to 1.20% on portfolios under $1 million, and declines to roughly 0.80% to 1.00% on portfolios above $2 million. That percentage can feel abstract. What it means in today’s dollars is: 1% of a $1.5 million portfolio is $15,000 this year. 1% of a $2 million portfolio is $20,000 this year.

That is the question this post is asking honestly: is that a reasonable price for what you are getting, given where you are in your financial life? Retirees drawing down — not still accumulating — face a specific version of this question: they are typically paying AUM fees in retirement at or near the highest dollar amount those fees will ever reach, while the work their advisor does generally does not scale with the balance. For a full breakdown of the cost comparison across portfolio sizes, see the flat-fee-vs-AUM cost comparison, which covers the general crossover math. This post focuses specifically on retirees who are already decumulating, because that phase changes the calculus in ways that are worth understanding on their own terms.

Why retirement is exactly when a percentage fee costs the most

Most people reach their highest portfolio balance at or near the point of retirement, before withdrawals begin in earnest. If you spent decades contributing to a 401(k), IRA, and taxable accounts, the balance you carry into retirement is likely the largest it will ever be.

A percentage-of-assets fee is mechanically tied to that balance. So the year you retire, or the years just before and after, your AUM fee is often at or near its highest point up to that time. And depending on your portfolio's performance and how much you draw down, the dollar amount of that fee can continue rising well into retirement if your balance keeps growing faster than you spend it. Not because the advisor’s workload increased. Not because the complexity of your plan grew. Simply because the balance, and the fee tied to it, tends to be near or at its peak in those early years.

As you draw down your portfolio over time, the balance may gradually decline, and so would the dollar amount of a 1% AUM fee. But in the early years of retirement, when you are managing the transition carefully and every outflow matters, the fee is at its highest. That timing is worth being clear-eyed about.

The planning work in retirement generally does not scale with your balance

Here is the core tension: the actual planning involved in retirement is driven by the complexity of your situation, not the size of your portfolio.

Coordinating when to claim Social Security, which accounts to draw from first for tax efficiency, whether and when to convert traditional IRA funds to Roth, how to manage required minimum distributions starting at age 73, and how to avoid triggering higher Medicare premiums through IRMAA, these decisions require careful analysis. But that analysis takes roughly the same effort whether your balance is $1.2 million or $2 million.

An AUM fee does not reflect that reality. It reflects your balance. A retiree with a $2 million portfolio pays twice the dollar amount as a retiree with a $1 million portfolio, even when the planning work is essentially the same.

An honest look at when an AUM fee still makes sense

That said, AUM pricing is not wrong for everyone in retirement. If your portfolio is below the break-even point for a given flat fee, an AUM structure may cost less in dollar terms. At 1% of a $1 million portfolio, the fee is $10,000 this year. Your Path Fi’s flat fee is $12,000 per year. For a retiree with a portfolio at that level, an AUM structure could be less expensive right now.

Some retirees also prefer an AUM structure because they find it intuitive: the advisor’s compensation is directly connected to the value of their investments. That alignment can feel natural, even in the decumulation phase. Working with a fiduciary advisor, whether flat-fee or AUM, means the advisor is legally required to act in your interest. Fee structure is a separate question from fiduciary status.

The question is not whether AUM pricing is illegitimate. It is whether the fee you are paying reflects the work you are receiving, and whether that structure fits your situation at this stage of life.

What a flat fee looks like in comparison

A flat-fee advisor charges a fixed annual dollar amount regardless of your portfolio balance. If your balance grows, the fee does not. If markets rise and your portfolio increases in value, you do not automatically pay more. The cost is predictable and defined.

At Your Path Fi, our flat-fee structure is $12,000 per year. That covers comprehensive financial planning and investment management: retirement income strategy, Social Security analysis, RMD planning, Roth conversion analysis, Medicare guidance, tax-efficient withdrawal sequencing, and investment oversight. One number. No percentage on top.

For retirees with portfolios above roughly $1.2 million, that flat fee is typically less expensive in dollar terms than a 1% AUM fee. At $1.5 million, the difference is $3,000 this year. At $2 million, it is $8,000 this year. At $2.5 million, it is $13,000 this year. These are today’s-dollar figures only, based on current balances. They are not projections or guarantees of savings.

The incentive question in decumulation

There is one more dimension worth naming, because you deserve to understand how fee structures can shape advice, even when an advisor has good intentions.

If your advisor’s fee is a percentage of your invested portfolio, their revenue is higher when your balance is higher. In the decumulation phase, some of the most important planning strategies, large Roth conversions, intentional drawdown from certain accounts, or spending from savings in specific years to manage future tax brackets, can reduce your portfolio balance in the near term. Those strategies may be exactly right for your plan. But they create a quiet tension for an advisor whose compensation is tied to the size of that balance.

A flat fee removes that dynamic. If a Roth conversion that moves $100,000 out of your traditional IRA this year makes sense for your tax situation over the next decade, the fee structure creates no financial reason to avoid recommending it. The advice can follow your plan.

Frequently asked questions

What is the difference between an AUM fee and an assets under management fee?

There is no difference — they are the same thing. "Assets under management fee" is the full name; "AUM fee" is simply the common shorthand. Both refer to the annual charge, typically around 1%, that an advisor levies as a percentage of the portfolio they oversee on your behalf.

Does my AUM fee go down once I start withdrawing?

It can, eventually. If you are paying a percentage of assets, the dollar amount of your fee tracks your balance. As you draw down your portfolio over time, a declining balance would mean a declining fee. But in the early years of retirement, when your balance is often at or near its peak, the dollar amount of an AUM fee is typically at its highest. The drawdown trajectory varies person to person and market to market, so the fee path is not predictable in advance.

Is a flat fee always better for retirees?

Not necessarily. For retirees with smaller portfolios, a 1% AUM fee may cost less in dollar terms than a flat fee. At Your Path Fi's $12,000 flat fee, the break-even compared to a 1% AUM fee is around $1.2 million. Below that level, an AUM fee can be less expensive right now. The right structure depends on your portfolio size, what each advisor includes, and what matters most to you. AUM pricing is not wrong for everyone, and a fiduciary advisor, whether flat-fee or AUM, is legally required to act in your interest regardless of fee structure.

How do I compare what I'm paying now to a flat fee?

Multiply your current portfolio balance by your AUM percentage. If your advisor charges 1% and your balance is $1.5 million, you are paying $15,000 this year. Then compare that directly to the flat fee you are considering. Your Path Fi's flat fee is $12,000 per year, covering comprehensive planning and investment management. The dollar difference is the starting point. Beyond that, make sure you are comparing what each advisor actually includes in their services, not just the fee amount. See the full cost breakdown across portfolio sizes in the flat-fee vs. AUM comparison.