Saving Period
For illustrative purposes, the following chart shows different fee scenarios for a 35 years old investor that has an RRSP portfolio of 70,000$, has no pension plan from his employer, earns a salary of 70,000$ per year (indexed to inflation) and expects to save 18% of his gross salary to invest in his RRSP every year. The simulation assumes a portfolio return of 5.0% per year and an inflation rate of 2.0%.
The chart clearly illustrates that paying higher fees significantly slows the accumulation of savings over a long period.
Retirement Period
The following chart continues with the same scenarios but also assumes that the investor retires at age 65 and begins a period of regular withdrawals. The amount withdrawn is 50,000$ per year (indexed to inflation) which is equivalent to 71% of income before retirement. Portfolio return assumptions are unchanged at 5.0% per year.
The chart clearly illustrates that paying lower fees over a long period allows to generate a retirement income for several more years before savings are completely withdrawn.
For an interactive version of this chart, try our
Fee Comparison Tool.