Investment manager fees

[cashflo2u2]

This may have been asked before. Does an investment manager's fee come out of my swdr? For example, if the manager charges 1% and I want to take out no more than 4% PA is my swdr composed of 25% to him 75% to me? Or does he take his from the remaining return rate and I get my full 4%? Either way it seem like it must have a notable effect on the fire calc portfolio survivability calculation

or does it?

 

[megacorp-firee]

1st of all, if you 'can' your advisor, you won't have a fee to worry about.

That being said, you are making things too complicated. IMO, you need to treat the fee just as you would any other transaction cost. You don't try and separate it out when figuring out swr or anything else for that matter.
So, as a simplified example, if you have $1m at the start of the year, then a 4% swr is $40,000. If at the end of the year, you found that you made 6%, you pay your FA his $10,600, you take out your 4%+ inflation and you are left with a slight growth in your portfolio. If you make less than 5%+ inflation, you have eaten into your equity.

As you have noticed, that 1% is a 'killer'. As espoused on this forum, you want to keep all of your fees as low as possible ... that is why people are 'anal' about expense ratios on mutual funds.

Good luck.

 

[cashflo2u2]

Actually, I did can my adviser. I was going back over the past several years to calculate what my actual withdrawal rate was and didn't know where to put his fee.

 

[FinanceDude]

Actually, I did can my adviser. I was going back over the past several years to calculate what my actual withdrawal rate was and didn't know where to put his fee.

Why are you doing that??

 

[cashflo2u2]

Why am I doing that? I dunno. During the last several years I just took money as I needed it and was not knowledgable about swdr. Now I is. I want to see if what I have taken is within the 4% swdr and therefore if I should be worried.

 

[audreyh1]

It doesn't matter what you did in the past. Just restart the clock today. Look at your portfolio now, and what 4% is now and keep to that limit now and in the future.

That SWR limit includes ALL monies withdrawn which means it includes all fees and taxes.

Audrey

 

[A854321]

The fee your investment manager charges comes off of your principal. If you want to receive 4% of your principal of a SWR, you would need to remember that your principal will be reduced by the fee. So annually, you will be reducing your principal by 5% not 4% if you are charged a 1% fee.

That's waaaayyyy too much money for me. Try looking at the dinkytown calculators to find out how much difference it makes in the long run. Going to a low-cost investment like Vanguard funds could save you hundreds of thousands of dollars over the lifetime of your retirement funds. For me, it would save upwards of half a million dollars. In my pocket, not theirs.

1% is not a low fee, by the way.

 

[2B]

1% is not a low fee, by the way.

The advisors think its very low. The ones that charge that try to make it sound like they are sacrificing to give you a good value for their services. From what I've heard from people that use FAs, most go for 1.5%+ and then put them in high cost funds.

 

[FinanceDude]

The advisors think its very low.

I don't think so, I think it's plenty, my blended portfolios are less than that.

From what I've heard from people that use FAs, most go for 1.5%+ and then put them in high cost funds.

That was probably true in the past, , is still true in VAs, or if the people you know are working with banks or insurance agents. I charge 1%, but only for 100% equity portfolios I contruct and manage myself.

The "wrap accounts" you speak of are still being sold, but mostly in credit unions and banks. I remember one brokerage firm locally that used to charge 3% for accounts under $100,000..........

 

[megacorp-firee]

The advisors think its very low. The ones that charge that try to make it sound like they are sacrificing to give you a good value for their services. From what I've heard from people that use FAs, most go for 1.5%+ and then put them in high cost funds.

It's a 'funny market' out there. I had an 'opportunity' to talk to another FA that was affiliated with my Trust Lawyer. He started at 1.5% and after talking to me and seeing that I don't need too much hand holding and would not put up with with that usurious of a fee, dropped it to .75%. I still respectfully declined his generous offer.