audreyh1
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Like many, I assumed you needed to subtract the average expense ratio of your mutual funds (as well as any other fees tacked on) from the classic Safe Withdrawal Rate to figure out what was truly safe to withdraw for personal use from a portfolio of mutual funds with expense ratios.
It turns out, it's not quite that bad. Thanks to AviOren on Morningstar who linked to this 2012 paper from Mike Kitces. It turns out that you just need to subtract 40% of your expense ratio plus fees from the "fee-free" official SWR (which is based on fee-free indexes rather than funds with expense ratios). Kitces also explains why. The Impact of Investment Costs on Safe Withdrawal Rates - Kitces | Nerd's Eye View
Scott Burns also mentions it's not as simple as subtracting the expense ratio, and suggests using firecalc to model your actual expense ratio and fees - AssetBuilder - Will the Real Safe Withdrawal Rate Please Stand Up? - AssetBuilder Inc., Registered Investment Advisor
[Apologies if this was already discussed back in summer of 2012, but I usually see folks here subtracting the expense ratio from SWR, including the recent discussion of the Pfau/Blanchett paper.]
It turns out, it's not quite that bad. Thanks to AviOren on Morningstar who linked to this 2012 paper from Mike Kitces. It turns out that you just need to subtract 40% of your expense ratio plus fees from the "fee-free" official SWR (which is based on fee-free indexes rather than funds with expense ratios). Kitces also explains why. The Impact of Investment Costs on Safe Withdrawal Rates - Kitces | Nerd's Eye View
Scott Burns also mentions it's not as simple as subtracting the expense ratio, and suggests using firecalc to model your actual expense ratio and fees - AssetBuilder - Will the Real Safe Withdrawal Rate Please Stand Up? - AssetBuilder Inc., Registered Investment Advisor
[Apologies if this was already discussed back in summer of 2012, but I usually see folks here subtracting the expense ratio from SWR, including the recent discussion of the Pfau/Blanchett paper.]
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