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Firecalc Investment Fees
Old 10-23-2009, 04:20 PM   #1
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Firecalc Investment Fees

Hi

I use Firecalc to determine an initial spending amount (to be inflation-adjusted going forward) that will result in a 95% success rate for 30 years.

My question is:

Does this initial 95%-successful spending amount already have the investing fees (or expense ratio) factored in? In other words, I don't have to reduce this 95%-successful spending amount any further to account for my investment fees, correct? Because I have already entered my investment fees into the "My Portfolio" page of the calculator, the calculator has already taken my investment fees into account and reduced the 95%-successful spending amount it gives me on the Results page accordingly, correct?

Bottom line: If I want, I can spend the entire 95%-successful amount (less taxes, of course) without needing to spend less to account for the investment fees I already entered into the calculator, right? The calculator has already made the adjustment for me and gives me a 95% safe NET spending amount AFTER the investment fees, correct?

Sorry for asking this question more than once, but I just wanted to be 100% clear and sure about this point. It's an important one.

Thanks.
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Old 10-23-2009, 04:23 PM   #2
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Quote:
Originally Posted by halo View Post
Bottom line: If I want, I can spend the entire 95%-successful amount (less taxes, of course) without needing to spend less to account for the investment fees I already entered into the calculator, right? The calculator has already made the adjustment for me and gives me a 95% safe NET spending amount AFTER the investment fees, correct?
Correct - but only if the future is no worse than the past.
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Old 10-25-2009, 12:47 AM   #3
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Originally Posted by halo View Post
Sorry for asking this question more than once, but I just wanted to be 100% clear and sure about this point. It's an important one.
Here's some food for thought. If investment expenses are such an important point in your analysis, then you're either paying too much or your portfolio is too small to have a comfortable margin of discretionary spending safety.

The typical example is withdrawing 4% from a portfolio after having paid 1% of that portfolio for management fees/expenses. 1% doesn't seem like much until it's compared to an ER budget.
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Old 10-25-2009, 07:43 AM   #4
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I might be missing your question, but if you look at the Your Portfolio page of FIRECalc there is an entry for investment expenses. It appears the default is 0.18%, which is attainable but far below the average most people pay. You can either enter your expected investment expenses, or adjust your expected returns to reflect after expense returns. Again, sorry if I'm missing your intended question.
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Optional: How is Your Portfolio Invested? If you leave this section alone, FIRECalc assumes your retirement portfolio is invested in a "couch potato" portfolio of 75% stock index and 25% bond funds, with a 0.18% fee to the fund.
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Old 10-25-2009, 09:16 AM   #5
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The 0.18% is based the fees charged to Americans on index funds by, for example, Vanguard, which are the lowest in the world as far as I know. If you don't have a US Social Security Number, you can't get these low fees. If you are dealing with a broker, insurance company, etc., you pay him a lot more on top of those fees.
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Old 10-25-2009, 08:18 PM   #6
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Yup, and if you can stash 100k in S&P 500 the Admiral Shares expense is only 0.09%. Cheapo man.
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