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Fidelity Retirement Planning Tool Question
Old 11-27-2015, 05:48 PM   #1
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Fidelity Retirement Planning Tool Question

I've put a lot of time entering a lot of data into the Fidelity planning tool. I'm wondering if I can get some insight into the pros and cons of using "todays" dollars versus "future" dollars. I assume that "future" assumes inflation and income increases on social security. I'm not sure if it "todays" view assumes an income return of zero or what. The both have me as in good shape, but I was wondering the differences and how people think of them.

Thanks.
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Old 11-27-2015, 06:09 PM   #2
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Quote:
Originally Posted by Jerry1 View Post
I've put a lot of time entering a lot of data into the Fidelity planning tool. I'm wondering if I can get some insight into the pros and cons of using "todays" dollars versus "future" dollars. I assume that "future" assumes inflation and income increases on social security. I'm not sure if it "todays" view assumes an income return of zero or what. The both have me as in good shape, but I was wondering the differences and how people think of them.

Thanks.
Today's dollars mean more to me than future dollars as it gives me the inflation adjusted value of my portfolio at the end of plan.
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Old 11-27-2015, 07:15 PM   #3
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the outcome will be the same for today's dollars or future. Typically your expenses would assume to go up with inflation, but if you use today's dollars, it would be a constant. Using today's dollars is looking a investment real returns... that is is removes the inflation effect.
So.. it is not just the $ left at the end that changes. It is removing the inflation effect. If you have a good outcome, you likely have a really big pot of $ at the end with future dollars. But not as big of a pot of $ using today's $. But it is likely easier to look at today's dollars as most will be able to understand the buying potential is to days dollars.
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Old 11-27-2015, 07:50 PM   #4
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Imho, both versions are helpful. Since tax brackets often are not indexed to inflation, future values help give you some insight to when you may be crossing brackets on a sustained basis.
I have also found a lot of variation from underperforming market impacts vs average markets. In our case, ending portfolio value with average markets is 3.5 times the value of underperforming market.
The new RIP also has changed its federal tax assumption from using 1040 tables to an "effective tax rate". Default is 15%. Be sure to check the sensitivities in your portfolio. You change on the expense page.
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Old 11-27-2015, 10:38 PM   #5
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I also like looking at projected income in today's dollars. RIP nicely shows the declining value of my non-COLA'd pension vs. the unchanging COLA'd Social Security.
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Old 12-06-2015, 08:56 AM   #6
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i can't figure out why here we are in the last few weeks of the year and when i tell the planner we are retired already it starts us out with a lower balance then we actually have , even though it acknowledges the full amount in the tool elsewhere .


it should start 2016 with our current balance but does not .. i even tried telling it 2016 would be our first year but it makes some kind of deduction in the report .
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Old 12-06-2015, 09:29 AM   #7
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i can't figure out why here we are in the last few weeks of the year and when i tell the planner we are retired already it starts us out with a lower balance then we actually have , even though it acknowledges the full amount in the tool elsewhere .


it should start 2016 with our current balance but does not .. i even tried telling it 2016 would be our first year but it makes some kind of deduction in the report .
Just a guess. If I recall, they quantify time based on year, not month or day. So I would assume they do there analysis based on year time frames. Thus I would suspect if you put "retired", it may be accounting for your spending for the present year even though it is pretty much done. Just a guess.
I see they have added extra notifications that this is just for education.
Remember all these calculators are just warm fuzzies, not a guarantee.
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Old 12-06-2015, 09:36 AM   #8
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i can't figure out why here we are in the last few weeks of the year and when i tell the planner we are retired already it starts us out with a lower balance then we actually have , even though it acknowledges the full amount in the tool elsewhere .


it should start 2016 with our current balance but does not .. i even tried telling it 2016 would be our first year but it makes some kind of deduction in the report .
The old tool did the same. In an "underperforming market" setting it will immediately reduce the following year's starting balance but if you change to "average market" you will see an increase in your starting balance.
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Old 12-06-2015, 09:37 AM   #9
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wow , okay thanks. so it is assuming 2016 will be the down year then ?
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Old 12-06-2015, 11:06 AM   #10
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just tried switching to average markets but it still made a deduction only less this time .
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Old 12-06-2015, 11:16 AM   #11
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just tried switching to average markets but it still made a deduction only less this time .
Not sure why. I just ran mine and it shows a -9.6% portfolio value for under performing market and +4.9% for average.
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Old 12-06-2015, 11:19 AM   #12
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but what about the starting balance ?

in theory my exact balance as of this minute should be the opening balance as of 1/1/2016 or within spitting difference .

whether i pick average or worst the starting balance is reduced by quite a bit in both cases . i mean we are taking about 300k in worst case and 200k in average .
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Old 12-06-2015, 11:21 AM   #13
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As I understand it, the tool takes out your annual spending from your prior year balance to start the year and then allows for any portfolio change. Amounts are not exact but should be in the ballpark.
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Old 12-06-2015, 11:23 AM   #14
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not even close to what the spending would have been , the deduction is way higher , as well as with just 3 weeks or so left the balance should really be the starting balance .
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Old 04-30-2017, 09:39 AM   #15
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Interesting how knowledge increases with time. I asked a question almost two years ago about future or today's dollars. The thread drifted to talking about the opening balance problem with the planner. Last night I was revisiting my planning and noticed the beginning balance problem. Today I searched for Fidelity planner and got my old thread and now the discussion about the beginning balance makes sense.

I still don't understand why it's set up that way and if someone has a better solution, I'd like to hear it. What I did just to get a better starting number is added an account with about $100,000 so that the beginning balance was closer to my current portfolio balance.
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