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Expense ratios matter

August 17th, 2009 at 09:30 am

So, I've been tinkering with this

Text is retirement calculator and Link is http://www.moneychimp.com/articles/randomness/retirement_odds.htm
retirement calculator. I changed the years to 30, but left everything else alone. The good news is that I have 100% chance of success! Great!

However, if I up the expense ratio to 1%, my percentages falls down to 96%, and at 2% ER, it my chances fall down some more to 91%.

Sure, it's only an arbitrary retirement calculator, but it's enough to show that your expense ratio do make a difference!

4 Responses to “Expense ratios matter”

  1. midlight21 Says:

    I would agree BA - we are nearing the 'push the button' on Hubster's Social Security. We owe on our house is the only debt at $353 a month if we don't pay it off. Utilities run right now at $300 a month give or take a little & $125 a month takes care of house & car insurance & end of year taxes on home & timeshare. I just upped this $125 to $135 for inflation sake just in case, so yeah... Low expenses mean that retirement might actually be doable! Good thing since the job market has dried up on us.

  2. monkeymama Says:

    As with anything - why pay more than you need to?

    I just mentioned recently that Vangaurd's Retirement funds were slightly cheaper than their Life Strategy funds. For essentially the same thing. (Difference was like 0.20 vs. 0.40). Decided to go with the cheaper one for the kids' savings.

    I've got some smaller amounts in funds nearing 1% but don't buy anything that cost more than that. Those (funds nearing 1% expense ratios) remain small parts of my portfolio.

    It's also why I like T Rowe Retirement. I don't mind researching funds/managing portfolio and all that - rather like it. BUT I can get a slew of expensive managed funds for a much lower expense ratio, that way.

  3. boomeyers Says:

    I can't wait to downsize once the kids leave the nest! The smaller and simpler the better! I don't even want to have a yard, but DH said he wouldn't have anything to do without one!
    Isn't it nice to have "virtual" numbers to play with?
    We are busy trying to just survive at this point, but it will be fun when we can concentrate on retirement!

  4. Apprentice Bliss Hunter Says:

    So true... expenses are nothing but a drag on funds.... and since no-one knows which funds will do better than others in the future I think going with the cheapest makes sense...

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