Lifetime investment assets of renters through investment cost improvements Improving on Fran and Fred’s lifetime financial plan through lower investment costs
Fran and Fred Frugal, both age 30, are a married working couple with $100,000 in combined annual earned income. They want to understand how valuable different personal finance strategies could be to their lifetime finances and their retirement security. In a baseline projection scenario, entitled: “Retirement Savings Needs of Renters — prior to any financial planning improvements,” they planned always to rent, not to have children, to retire at age 65, not to use any tax-deferred investments, and to pay average investment costs.
Obviously, Fran and Fran have NOT adopted many of the lifetime financial planning practices that may make it easier to achieve financial success in life. See the “Fran and Fred’s Baseline Lifetime Planning Assumptions:” section at the bottom of this article for more information about Fran and Fred’s current personal finances and their other lifetime financial planning assumptions.
In a series of articles, The Skilled Investor will compare different lifetime financial planning projections for Fran and Fred to illustrate the relative value of adopting different financial planning strategies. To find a list of other articles about Fran and Fred as renters, click “Age 30 Renters” in the right hand column under “Find More Articles on These Topics.”
This “what-if” projection changes their baseline case. In particular, they have decided to analyze the lifetime benefits of reducing their investment costs.
Reasonable lifetime investment costs for Fran and Fred
At age 30, Fran and Fred have begun to reevaluate their financial practices. They want to know how much they “need to save” or “could spend” this year and in the years ahead and still have enough over their lives until age 95.
For their baseline lifetime plan, the negative effects of the cumulative investment costs that they are projected to pay are shown in this graphic. Things look pretty ugly.
Fran and Fred expect to pay investment costs that are typical of an average investor. This graphic is one of the reasons why The Skilled Investor keeps harping about reducing investment expenses. Even average investment costs are simply outrageous, and they can be the difference between success and failure of a family’s lifetime financial plan. For more information on investment costs, see these 15 articles in the “Controlling Investment Costs” section of The Skilled Investor’s main website.
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