Fidelity Retirement Income Planner expense jump

[smileydog]

I utilize the Fidelity RIP from time to time for a sanity check on retirement planning but recently have noticed some wide swings in expenses for 30+ years into the plan. I could imagine that they are assuming some large medical cost or other unknown expense. Has anyone else noticed this strange bump in expenses that lasts about 6 years - then drops down to a predicted level?

 

[smileydog]

Well... I guess i'm the only one with an issue since no one is chiming in. Strange that expenses show 400k increase for 6 years then go back to inflation trend. Maybe they have a fully functioning crystal ball.

 

[Tyro]

Could it have anything to do with required minimum withdrawals or a gap between when some source runs out and some other source else kicks in?

 

[MasterBlaster]

I can't imagine why expenses would suddenly go up...

But I wonder, Are you married to an older spouse ? Could it be the loss of the spouses Social Security/and or pension upon death ?

Or has one of the asset groups been exhausted then and the other groups have to cover it ?

 

[jkrm]

If you haven't already tried it, look for expenses in the budget worksheet that vary by year - I think it puts an asterisk next to those - and click the link that reads "vary expense" or something like that (I don't have it open right now so I am working from memory). One of them probably has the suspect numbers in there. Can't speculate on how they might have gotten there, but I have had odd things happen with RIP also.

 

[H2ODude]

I think the quickest way to reveal it is look at the "detailed cash flow sheet" next to the final graph. I find it very revealing. It shows expense broken down as tax, expense, etc. It's actually what I use to judge how "spot on" it and I are in our comparisons. Pretty sure you'll go "Ah HA" when you look at it.

 

[rescueme]

Agree with the prior two posts.

Assuming you use the detail expense sheet (rather than just the lump sum expense entry), it's somewhere "under the covers" and probably is related to an entry you made in the past, when you had some different ideas related to year by year expenses (yes, I have done it )...

 

[Live And Learn]

+1 on the above posts.

(a) At the end do the detailed expense chart. It could be taxes based upon timing of distributions from tax deferred accounts.
(b) look at the "vary expense" rows (with the **) - you may put something in there (bump in HI perhaps until Medicare kicks in ?)

 

[smileydog]

Well I was set to try the above suggestions yet I've been unable to get into the site. I had actually looked at the expense detail and the jump of expenses was from age 80 to 85 then back to normal. Anyway just a mystery at this point. I'm thinking it is just a glitch but who knows... My budget was entered as an amount and not the detailed sheet (I used my own spreadsheet from my actual spending over the past several years). DW is younger that me and we would be well beyond any expected changes in healthcare.

 

[truenorth418]

I have been tinkering with RIP lately, too. I noticed big increases in expenses related to taxes on my IRA required distributions. It was a good signal that I should develop a strategy for tax efficient timing of withdrawals. When IRAs, pension, SS, and iBonds all come online with a few years of each other the tax implications are enormous.

 

[RobLJ]

I have been tinkering with RIP lately, too. I noticed big increases in expenses related to taxes on my IRA required distributions. It was a good signal that I should develop a strategy for tax efficient timing of withdrawals. When IRAs, pension, SS, and iBonds all come online with a few years of each other the tax implications are enormous.

This is the issue for us--combination of IRA, 401k, and SS distributions 10 years down the road-I'm trying to wrap my mind around. Until about six months ago, I haven't worried about distribution side, just accumulation. After the election I'm going to hire a fee only planner to at least give us some alternative strategies and pro/cons, since it looks like we might retire early in 2-5 years. Before the election and the out-come of the Bush cuts, it probably is a waste of money, at least given our time line.

We just hired a lawyer to do the will, which is embarrassing, since our "boys" are 22 and 25.

 

[H2ODude]

I have been tinkering with RIP lately, too. I noticed big increases in expenses related to taxes on my IRA required distributions. It was a good signal that I should develop a strategy for tax efficient timing of withdrawals. When IRAs, pension, SS, and iBonds all come online with a few years of each other the tax implications are enormous.

This is why I like FIDO's RIP so much. It isn't that strong on providing you the range of variability of outcomes, which is what I like about Firecalc. What it does do is as best as it can generate the tax implication of your portfolio and demonstrate that so you can be aware of the traps ahead (shown in the detailed cash flow chart). For giggles I was playing with disaster scenarios and just clicked our main taxed brokerage account (~35%) to not be included. Then I eliminated my main non-Roth IRA (~50%) to not be included. Resulting max withdrawal was higher with losing the 50% IRA than the 35% brokerage. Took me a while to figure out that no, RIP was not broken, it was recognizing the tax cut that Sam want's from the IRA.