Welcome to the Bowman financial strategies. Retirement made simple series. Your host is Erik Bowman, retirement income certified professional and certificate holder of the national social security association.

Today's video is going to be a pretty short video. I'm covering a different way to think about percentages that may help make them a little bit easier to understand. Most people think about 1% or 1.5%, and then they pretty much understand 1% of a dollar is going to be 1 cent. 1% of a hundred dollars is $1. But when we start getting into these more complex percentages, like 1.26%, and we're going to add on to that another 0.32% things can start getting a little bit fuzzy at that point. So, let's think about percentages a little bit differently. There's something called a basis point. 

There are 100 basis points in 1%. If we're going to add 1% plus 3/10 of a percent, 3/10 of a percent is 30 basis points. So, it's 100 basis points for that first percent plus 30 basis points for that 3/10 of a percent. So, 1.3% is at 130 basis points. 

So, let's talk about number smaller than a percent. A half of a percent equals 50 basis points, three quarters of a percent equals 75 basis points. This makes it really easy when you're trying to actually calculate something that you should find very important and that's knowledge of the fee structure of the investment strategies that you are a part of. Because many times there are different levels of fees and those fees may range anywhere from 1/10 of a percent up to over 2%. 

So, for example, you have a financial advisor that's charging you 1% in the advisory fee and they're using an investment platform that has a 3/10 of a percent fee, and then the ETFs may be inside of that platform have expense ratios of 0.17%. So, if we break that down into basis, points are quite easy to figure out what your total percentage is. You've got 100 basis points for the advisory fee, you have 30 basis points for the platform fee, so now we're at 130, and you have 17 basis points for the expense ratio. Add all those together, total fee, all levels, 147 basis points or 1.47%. I like using basis points, I think that it's a lot easier way of dealing with percentages. I hope it helps clarify things for you. 

Please watch our other videos on the website. We have a lot to choose from covering all sorts of topics relevant to your retirement planning. If you're watching this video on YouTube, please do subscribe and like this video so that we can continue to bring you content to help you make more informed decisions in retirement.

To Watch other webinars go to Bowmanfinancialstrategies.com and learn about topics like social security, maximization, Roth conversions, and tax efficient distribution strategies in retirement.