The Hidden Cost of Retirement: Investment Fees and the 4% Rule

The 4% Rule says we can spend 4% of our investments in the first year of retirement, adjust that amount each year by inflation, and our money should last at least 30 years. But did you know that it assumes we pay nothing in investment fees.

And if you pay an advisor 1% a year to manage your portfolio, you'll need to reduce your spending by 10%.

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#retirement #fees #robberger

ABOUT ME

While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.

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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.

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[alphamale]

Like Bogle said, "In investing, you get what you don't pay for".

[hannahmanager]

Then please do a video on how to avoid these fees

[ncooty]

It would probably be clearer for most people to say 3.6% rather than 10% less than 4%.

[jeffrice]

Manage your own or at worst go with low cost providers like Vanguard and Charles Schwab.

[kimappreciateslife]

No advisor for me! They do nothing but try to sell you products with commissions. No one cares about your money as much as you do.

[dc]

I handle my own money. I'm a retired engineer so working with numbers is no big deal.

[ltmsimply]

That’s why I manage my own and teach others to do the same🎉!! 1% defiantly adds up in 30 yrs

[ncooty]

This doesn't quite say what fee rate or structure was assumed for the 4% rule.

[VIDAS_TEAM]

This exactly what I have always though .. no one account for that 1-2% management fees

[johnfijnvandraat]

That's why I look at it from stance of 2% of total value or balance of dividends paid is what you should plan for then you will definitely have enough to cover your expenses

[jiyadavi]

I retired last month. Having a bucket system really helps me remain calm during the recent volatile mrkt, the only problem
is I still have over $1 million of mortgage debt. I can easily get rid of it if I sold some liquid assets. Do you think it's better to
prioritize paying down the mortgage or keep my money working in the financial mrkts?

[boby]

In the 1st 10 years they take incrementally 10% ( 1% + 1%+1% +1%+1%+ 1%+1%+1%+1%+1%) ; plus your missing out on the work that 10 % could have made you over that 10 years.

[ncooty]

The math here doesn't seem to line up. A 1% fee on AOM is like a 1% headwind on total gains. Are you saying the 4% rule is that sensitive to a mere 1% difference in total gains? What am I missing here?

[ChloeBensonBeautyBoxes]

Why can’t you just subtract the fee from your 4%?

[Random-ldwg]

why doesn't it drop all the way down to 3% in the first yr for someone implementing the 4% rule and has a 1% AUM fee?

[carfed]

Dear Rob and fellow subscribers,

I need some assistance with the following questions:

Where can I find the complete calculation of an ETF/Mutual Fund's performance based on its portfolio?
How can I view the full performance of an ETF/Mutual Fund before deducting fees, expenses, and other costs?
Where can I find detailed information about fees and expenses?
If a target fund shows an expense ratio of, for example, 0.12%, and the fund's composition includes investments in several other funds, sometimes from third-party companies, where can I find the expenses associated with these underlying funds?
Thank you for your help, and I apologize for my lack of knowledge on this topic.

[computerhelpcc]

UBS is effectively 1.8%. Getting off that train while market is still high. Insurance co fin advisor charges .67.

[noyopacific]

Accounting for a 1% advisor fees I'd think you'd need to reduce your withdrawal rate by 25 % from 4% to 3% to account for that 1% fee?

[matthewbegin]

I feel like you need to look at how much you may need when you are 90 years old. I will be spending way more at 66 than I will at 85.

[karimelzein]

Watch Common Sense Investing's video on the 4% rule it covers this exact topic in-depth