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WealthRuler / TDAm report
Old 04-14-2008, 04:55 PM   #1
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WealthRuler / TDAm report

I saw an ad on TV for WealthRuler(tm) (WR) which is a free software tool to help you decide how much you need to have saved up for retirement and how to get there. It is found at the TDAmeritrade site, so since I have a relatively dormant account there, I thought I would give it a try and report here. Here is a link to the tool.

WR is a MonteCarlo simulation tool which lets you enter all your portfolio assets, then gives you a report. In that sense, it is similar to FinancialEngines and FIRECalc. There is documentation that explains the assumptions and methodologies used. The result is an "Action Plan" that tells you "On the right track" or "You have a Shortfall" with how much additional to save per month). One can adjust retirement age, whether you work part-time, SS benefits, as well as one-time expenses and/or income.

One can enter the dollar amount of your accounts. For each "account" that you enter, you give the type of account (IRA, 529, 401k, taxable), the additional annual contribution until retirement, as well as the asset allocation (% stocks, % bonds, % cash), but cannot give the individual securities ticker symbols. You do not have to enter your TDAmeritrade assets as those are pulled in automatically for you. Your entered data has persistence from one session to another, and my data had persistence from one computer to another when I logged into my TDAm account.

You can enter a number for your monthly retirement expenses, but it will try to figure those out from your annual income (which you can enter) as well. The assumption for the "figuring out" appears to be 80% of your annual income, so some folks won't like that, but you would then just override the number.

The results are pretty simple and show what your assets might be in a "Poor Market" and an "Average Market" which are defined in the documentation. My results were a little more conservative than the results of FIRECalc suggesting that I should save more, start with a large nest egg, or retire later.

There is no way to assume any different spending scenarios in retirement like those that FIRECalc supports.

So for folks who like to use these kinds of tools, I would recommend WR. It gives you another data point to compare your assumptions and numbers with.
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Old 04-14-2008, 05:56 PM   #2
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That was fun.

I specified a 36 year retirement, and with my conservative AA, it predicts success with an SWR of 3.8%. I guess that's reasonable.

Like you said, it give us another data point to compare our assumptions and numbers with. I would never trust any of these calculators, even our beloved FireCalc, to be more than a tool in planning ER. (Ultimately, the responsibility for my decisions is mine.)

It's reassuring to see that another calculator has given my plan the green light.
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Old 04-14-2008, 11:28 PM   #3
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I get weird results.

If I understand well the methodology, all input and output numbers are in today's dollars. According to the calculator, for a gross annual retirement income of $66,000, my target asset number is almost $2.35M at retirement. So the SWR would be 2.8% (and that's for high risk tolerance!) and it means a retirement age of 53-58 depending on market performance (and therefore a 37 to 42 year long retirement).

The target asset number and retirement age are strikingly higher than what other calculators have returned for my situation. So I looked around and it looks like, the SWR depends heavily on your retirement age. For example, for a plan extending to age 95, if I were to retire at 40, the SWR allowed would be 2.07% (for high risk tolerance). At age 45, it would be 2.23%. At age 50, it would be 2.48%. At age 55, 2.67%. At age 60, it would be 3%. At age 65 (with 30 years left in retirement), it would be 3.5% (again it's the high risk scenario). No 4% SWR anywhere... As a comparison, FIREcalc would allow me to retire at age 45 (50 year retirement) with a SWR of 3.53% (instead of the 2.23% for TD's calculator) with a success rate of 99%.
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Old 04-15-2008, 06:55 AM   #4
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Quote:
Originally Posted by FIREdreamer View Post
I get weird results.

If I understand well the methodology, all input and output numbers are in today's dollars. According to the calculator, for a gross annual retirement income of $66,000, my target asset number is almost $2.35M at retirement. So the SWR would be 2.8% (and that's for high risk tolerance!) and it means a retirement age of 53-58 depending on market performance (and therefore a 37 to 42 year long retirement).
I think if you specify an "income" the calculator takes that as an income prior to retirement. When I specified my pension as an "income" coupled with my portfolio and the supplemental withdrawals we need, I failed miserably and the calculator told me I needed a boatload of extra assets. When I removed my "income" I was successful.
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Old 04-15-2008, 07:10 AM   #5
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Most brokerages and financial advisors have a vested interest in keeping you hitched to the plow and socking money away with them to manage. I would expect TD Ameritrade to not be any different than the other broker related sites that can be used to calculate "the number."

The nice thing about FIRECalc is that it doesn't have a vested interest in our leaving our money with them as long as possible. It also can use "real" if only historical data.

The ugly truth of this retirement stuff is at some point we have to pull the cord (or someone pulls it for us). Then we buy our ticket and take our chances. Watching the market huff and puff makes people anguish about running out of money unless they are blessed with major COLA's pensions.

I wouldn't run my life with a calculator and especially with a brokerage's calculator. There are too many variables they don't include and they certainly can't predict the future. Ultimately, they can only show if you are "close." I believe all plans need a serious "what if the market tanks" option to control spending and/or return to w*rk.
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Old 04-15-2008, 07:31 AM   #6
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Vanguard has a similar one run by Financial Engines. Any idea how the TDA one compares to the VG tool?
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Old 04-15-2008, 08:17 AM   #7
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I have used Financial Engines via the Vanguard site. It is way more complicated: you must enter all your investments via their ticker symbols while for WR you enter your amounts and percentages of stocks, bonds, cash. It's true that you need to somehow know your percentages, so I used mine from M* portfolio X-ray.

The Vanguard FE is persistent, so what you entered previously is there. The results basically suggest changes in your funds and not necessarily how much more to save and invest. For me, the suggested changes were always the same bogus answer: sell everything and buy Vanguard intermediate term bond fund. In the end, I judged FE as basically useless, but I think some others like it.
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Old 04-15-2008, 08:38 AM   #8
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One of the benefits of my profession (computer programmer) is the ability to write my own projection software. I've written a relatively simple program that allows me to "tweak" more than a dozen variables specific to mine and my wife's particular circumstances. Plus, I trust it a lot more, since I know exactly how the numbers are being crunched.
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Old 04-15-2008, 04:55 PM   #9
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Quote:
Originally Posted by kombat View Post
One of the benefits of my profession (computer programmer) is the ability to write my own projection software. I've written a relatively simple program that allows me to "tweak" more than a dozen variables specific to mine and my wife's particular circumstances. Plus, I trust it a lot more, since I know exactly how the numbers are being crunched.
I've written several simple programs. The "unpleasant truth" (that is real) is that everything hinges on your assumptions of inflation and return. We all need a "what if" plan for when inflation exceeds our expectations (and historical results) and stock market returns falter (below historical results).

My plan is to be ultra-conservative with basic living expenses and use the "resonable" or uber-retruns to fund travel and excessive entertainment.
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