Importance of expenses. Over your future investing & retired life, assume you earn 8% before expenses. You have $10,000 in your Roth IRA. You save an additional $5,500 per year for the next 45 years. You plan to spend your portfolio over a 25-year retirement.
a. Assume your investment expenses are 0.9% per year. How much can you spend each year in retirement? [Deduct the expense from the 8% as a first step.]
b. Assume your investment expenses are index fund low —0.1% per year. How much can you spend each year in retirement? [Deduct the expense from the 8% as a first step.]
c. How big a % increase is this?