Not necessarily costs of retirement, but more of potential costs during retirement. The latest Paul Farrell article over at cbsmarketwatch.com is about saving money on investment expenses in retirement. Farrell compares the average costs of using an active manager charging an advisory fee of 1% of assets combined with the costs of the average managed mutual fund, using a 1 million dollar portfolio.
When adding the costs together, he comes up with $23,000 for the first year, Actually I say the first year, not Farrell, because obviously each year's total expenses will be different since the total portfolio value will be different.
Farrell also mentioned the Coffeehouse portfolio, consisting of a 60/40 split, where the 40% is in an intermediate-term bond fund like VBMFX, and the 60% is divided evenly among 6 equity asset classes (LB, LV, SC, SCV, REIT and INT'L). Using all comparable Vanguard funds, you'd pay $2,270 in expenses that first year- roughly 1/10th of your expenses if you took the advisor route mentioned above. But wait, it gets better.
Since you'd have a total of $1 million held at Vanguard, some of your shares would be converted to Admiral class, providing even more savings. How much? Well, there are 5 comparable admiral class funds of the seven mentioned in coffeehouse-related articles. Using these 5 fund's ER, you'd now pay only $1,420 that first year, about 1/16th of the high-expense road.
Since we cannot control our portfolio's returns, we are reserved to accept what each sub-class of the market that we own gives us. We can control what we pay to enjoy (or suffer) those returns provided.
It may not the smartest, most intelligent way to go (remember, I'm only an indexer -mostly), but then again, what's so smart about paying over 1000% more than you need to for anything out there?
Bookm
When adding the costs together, he comes up with $23,000 for the first year, Actually I say the first year, not Farrell, because obviously each year's total expenses will be different since the total portfolio value will be different.
Farrell also mentioned the Coffeehouse portfolio, consisting of a 60/40 split, where the 40% is in an intermediate-term bond fund like VBMFX, and the 60% is divided evenly among 6 equity asset classes (LB, LV, SC, SCV, REIT and INT'L). Using all comparable Vanguard funds, you'd pay $2,270 in expenses that first year- roughly 1/10th of your expenses if you took the advisor route mentioned above. But wait, it gets better.
Since you'd have a total of $1 million held at Vanguard, some of your shares would be converted to Admiral class, providing even more savings. How much? Well, there are 5 comparable admiral class funds of the seven mentioned in coffeehouse-related articles. Using these 5 fund's ER, you'd now pay only $1,420 that first year, about 1/16th of the high-expense road.
Since we cannot control our portfolio's returns, we are reserved to accept what each sub-class of the market that we own gives us. We can control what we pay to enjoy (or suffer) those returns provided.
It may not the smartest, most intelligent way to go (remember, I'm only an indexer -mostly), but then again, what's so smart about paying over 1000% more than you need to for anything out there?
Bookm
