Fidelity RIP

[tmm99]

I used Fido planner before, but not too seriously. I re-looked at this over the weekend, and I realized that the plan is withdrawing more money than I need due to minimal distribution requirement starting at age 71, and is assuming that I am actually spending the extra money withdrawn.....

Did anybody notice that? How do I go around this? The part Fido calculates the tax implication is great, but maybe there is something I can tweak the withdrawn money somehow (save off extra in after tax or something?)? Am I missing something?

I do Vanguard RIP and of course, FireCalc, so it's no big deal that Fido has its own quirks, but I just wanted to see if there was some way around this.

 

[jcretire77]

I am a novice user of RIP which for my goal of retirement show that in two years the assets at the beginning of retirement are less than I have today. 2.333 vs 2.297. How conservative do you need to get!

 

[Live And Learn]

jcretire77 - that is because they take out the first years expenses since it assumes you are giving it a year end balance

tmm99 - I've veen using FIDOs RIP for years and never noticed that it assumed you needed to spend all the RMD. I guess you could tweak it by adding in "one time lump sums" each year that you're not spending the full RMD but that sounds like a royal pain to do.

 

[jcretire77]

Seems like a hefty decrease with two years yet to save and markets hopefully to increase. That should be much more than one years expenses. But not overly important.

 

[jcretire77]

Curious if there is an obvious answer why there are such large differences between Fidelity RIP success rate when using the detailed expense budget vs the Approximate Amounts for Living choice. Other then medical inflation rate?

My example numbers:
$4405 Essential
$3595 Discretionary

8K / month Detailed fails, $247,379 shortfall
8K / month Approximate, $1.9 million at end of plan

so change the Approximate entries until it fails
9K / month Approximate, $1.2 million at end of plan
9.4K / month Approximate, $96k at end of plan

 

[MRG]

Curious if there is an obvious answer why there are such large differences between Fidelity RIP success rate when using the detailed expense budget vs the Approximate Amounts for Living choice. Other then medical inflation rate?

My example numbers:
$4405 Essential
$3595 Discretionary

8K / month Detailed fails, $247,379 shortfall
8K / month Approximate, $1.9 million at end of plan

so change the Approximate entries until it fails
9K / month Approximate, $1.2 million at end of plan
9.4K / month Approximate, $96k at end of plan

Yep, its what you think, assuming nothing else changed, like inflation rate, or AA. Mine did the same, RIP applies a higher inflation rate for medical expenses. You might try modifying your monthly medical expenses, put the difference in discretionary expenses. Thats how I back tested it, YMMV. Past that check with fido.
MRG

 

[nwsteve]

The higher inflation rate for medical is specifically to capture the historical reality of medical expenses rising much more rapidly than the general inflation rate which is used for all the other expenses.
If you want to capture excess funds from RMD assuming to be spent, one work around is to create an "annuity" income stream that will approximate what you consider as "excess" withdrawals. You can tweak by creating multiple annuities tranches with later start dates if you want to "recapture" any bumps that are caused by RMD payouts.
Nwsteve

 

[daylatedollarshort]

I used Fido planner before, but not too seriously. I re-looked at this over the weekend, and I realized that the plan is withdrawing more money than I need due to minimal distribution requirement starting at age 71, and is assuming that I am actually spending the extra money withdrawn.....

Did anybody notice that? How do I go around this? The part Fido calculates the tax implication is great, but maybe there is something I can tweak the withdrawn money somehow (save off extra in after tax or something?)? Am I missing something?

I do Vanguard RIP and of course, FireCalc, so it's no big deal that Fido has its own quirks, but I just wanted to see if there was some way around this.

From the RIP methodology .pdf -

"After MRD amounts are withdrawn from retirement accounts (excluding pension plans), the tool assumes these savings are
redeposited in a hypothetical taxable account and are available
to meet retirement goal expenses."

Check out the detailed cash flow. If you are not spending all your RMDs they will be < than your portfolio withdrawals.

 

[tmm99]

From the RIP methodology .pdf -

"After MRD amounts are withdrawn from retirement accounts (excluding pension plans), the tool assumes these savings are
redeposited in a hypothetical taxable account and are available
to meet retirement goal expenses."

Check out the detailed cash flow. If you are not spending all your RMDs they will be < than your portfolio withdrawals.

Thank you very much. Someone in another thread pointed this out to me. Now I know how Fidelity RIP works a little better.

 

[bondi688]

Fidelity RIP? I thought upon reading the title, Fidelity had gone out of business!!