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Many investors don't look closely at fund fees and may not realize how the costs may add up overtime.
At AARP Financial, we keep fund fees low — in fact, low fees are one of the principles that guide our fund management and investment strategy.
The following is only an example. But it does show you, with other factors being equal, just how much difference lower costs may mean when it comes to how long a given amount of investments may last during retirement.
In the hypothetical example below, the investor who chose the lower cost fund ended up with more money at retirement. The example shows how the additional amount resulting from lower fees may translate into more years of retirement payouts — in this case, nearly six more years.
For purposes of calculating accumulation (not shown in graph), the example assumes an annual IRA contribution of $5,000 per year, increased annually by 3% for inflation, for a period of 20 years. The balance for each year is decreased by an assumed fund expense of 0.99% in one analysis and 0.50% in the other; then, a 7% earnings rate is applied to both situations. In the withdrawal phase (graph), a withdrawal of $19,300 is applied to each analysis. The cash flows of $19,300 last for almost 22 years in the 0.99% analysis and for a little over 27 years in the 0.50% analysis.
Source for asset-weighted average of annual expense ratios and annualized loads for individual funds: Investment Company Institute, 2009 Investment Company Fact Book, 49th Edition, 2009.
The mutual funds described in this site are sold only to U.S. residents.
An Investment in the Funds involves risk, including possible loss of principal. Please consider the investment objectives, risks, charges and expenses of the AARP Funds carefully before investing. The prospectus contains this and other important information about the Funds. To get a prospectus containing this and other information, click here (PDF) or call 1-866-218-6142. Read it carefully before you invest.
While AARP has licensed the use of its name to AARP Funds and endorses the services provided by AARP Financial Inc., AARP does not offer financial products or services itself and cannot recommend that you or any specific individual should purchase any particular product or service. AARP Financial Inc. is an investment adviser and a subsidiary of AARP.
The Financial Advisors are registered representatives of ALPS Distributors, Inc., a registered broker-dealer, and as investment adviser representatives of AARP Financial Inc., an investment adviser. AARP Financial Inc. offers investment advisory services and is not affiliated with ALPS Distributors, Inc.
AARP Funds are distributed by ALPS Distributors, Inc.
