Instead of drawing more money from savings after reducing expenses, you could withdraw the same amount and lower your chances of outliving your money. Then again, you could choose to enjoy the benefit of lower fees in other ways.
Get expenses down to 0.3% a year, and income goes up to $42,000. And if you can trim annual expenses to 0.5%, your sustainable annual draw climbs to $40,000, an extra ten grand a year in inflation-adjusted income.
If annual expenses drop from 1.5% to 1%, your sustainable annual withdrawal rises from $30,000 to $35,000, an extra $5,000 in inflation-adjusted income each year. Look what happens, though, when you start paying out less in fees. If 1.5% of your retirement portfolio's value goes to fees each year, the calculator estimates that you can withdraw 3% of your savings, or $30,000, the first year of retirement, increase that amount for inflation each year and have a 90% chance that your savings will last at least 30 years.Ĭheck Out: The Best Way To Invest For Retirement Income Let's assume you and your wife are 66 and 63 years old respectively, have $1 million invested in a 50-50 mix of stocks and bonds and that you want a high level of assurance that your savings will s upport you for the next 30 years. To show you just how much you might be able to enhance your retirement prospects with this simple step, here's a quick example I ran using the American Institute For Economic Research's Retirement Withdrawal Calculator. The reason: cutting expenses is one of the easiest ways to increase the amount of income you can draw from your nest egg without taking on extra risk.Ĭheck Out: Do You Have Financial "Street Smarts"? Try This Quiz In fact, I think all retirees living off their investments (not to mention people still building a nest egg) should at least take a hard look at how much they're paying in investment costs, including any fees to advisers, to see whether they can do better. We're thinking of moving our retirement savings to reduce our expenses. My wife and I are retired and have noticed that the annual investment fees we pay really add up.
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