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charting retirement

You may or may not know how much you’re paying for investment advice. But you are almost certainly not aware of how quickly those fees can add up when saving for major goals like retirement.

Imagine Graham starts to save when he is 33 years old, back in 1993, when his salary is $35,000. His earnings grow over time, but he remains firmly in the middle-income category.

Graham saves 10 per cent of his income in an RRSP for 12 years. He increases that rate to 15 per cent for the next 12 years and in his last six years of work saves 20 per cent of his pay. During this entire time, Graham is earning an investment return based on a 60/40 asset mix – 60-per-cent stocks and 40-per-cent bonds – less 1.8 per cent for investment fees.

This 1.8-per-cent fee level is typical of a retail portfolio made up of mutual funds that are actively managed. We use actual returns for the past and assume a 6-per-cent return before fees for the future. Graham’s savings peak at $615,000 at age 63, when he is on the brink of retirement. But how much has he paid in investment fees?

Now imagine those investment fees were stashed in a fund that earned 4 per cent a year. The chart above shows what would have been the case by age 90, Graham’s last full year of life. Because Graham was drawing a steady income during his retirement years, his savings had dwindled to $40,000 while the fees that Graham had paid over the years would have accumulated to $800,000, more than he ever amassed in savings.

Frederick Vettese is former chief actuary of Morneau Shepell and author of the PERC retirement calculator (

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