2. Mutual Fund Fees and Retirement Savings

Prof. Finance moves to new university and has $100,000 in retirement savings to invest (rollover) into new retirement account. Prof. Finance wants to invest this money for 25 years in an indexed stock fund, which is expected to return 9% annually before fees.

Prof. has two choices: Vanguard Total Equity Fund with a 0.4% annual expense fee and Onguard Total Fencing Fund with a 1.2% annual expense fee.

Questions:

a. What is the difference in Prof. Finances expected future retirement savings between the two funds?

b. What would retirement savings if no fees were charged?