Promising new website

[hogwild]

Fidelity has launched a new website that provides information for retirement issues from their Fidelity Research Institute:

http://www.fidelityresearchinstitute.com/

Their first publication, "Beyond Conventional Wisdom" is on the website and you can download in PDF format.

This document addresses withdrawal stategies.

 

[Nords]

http://www.fidelityresearchinstitute.com/_pdf/Beyond_Conventional_Wisdom.pdf

Interesting. Let's pretend for a few minutes that this advice is objective and not designed to send "investors" running to their nearest financial advisor & screaming for help.

First, where's the proofreader?!? The first graph has blank space for a title and a Y-axis label, but neither are showing up in my version of Acrobat Reader. The rest of the figures appear to be okay but the typo makes a heckuva first impression.

Second, Boomers following this guidance will be working for a long time. Guessing from the accompanying text, the graph in Exhibit #1 is supposed to have a Y-axis label that starts at zero and rises in increments of two. The implication is that age-55 ERs should limit their SWR to about 3% if they don't want to run out of money in their 90s, and that also assumes inflation is a constant 2.47%. Kinda different from FIRECalc's data, and even more conservative than most popular Monte Carlo calculators while having a horribly optimistic perspective on inflation. Based on these numbers & graphs, presumably no one is stupid enough to retire before age 55-- or else they've given up ER and gone back to work.

Third, another indication of Boomers working until they drop is the emphasis on delaying SS while earning income. Apparently the workers run out of money unless they delay SS until at least age 65, including additional catch-up contributions to 401(k)s. In one analysis, Exhibit #5, the only salvation for these poor people is purchasing an annuity (or annuitizing their company pension).

Finally, one case study shows a couple retiring at age 55 to start their own business "which they plan to work on well into their retirement years".

I guess I shouldn't complain. Fidelity only uses the phrase "85% of their pre-retirement income" once, and the people who blindly follow Fidelity's advice to work forever will probably save both SS & Medicare through their continued payroll contributions.

It's also a powerful reminder of why I only use the company for their cheap custodial services...

 

[Rick S]

Sometimes I really wonder if there are some out there who want to just scare the hell out of people so they won't think about retiring and will keep the consumerism mindset.

Don't you love those ads on TV for "financial planners" where one of the things they show you is: What is your dream? What if money were no object? ... and the answer is "start a vineyard." Get real.

I think the point is: If you keep working, you keep consuming at a higher level... and consumerism is good for everyone!

 

[Rick S]

.. but, more importantly, thanks to Nords for exposing it for what it is!

 

[Alan]

I guess they may be use their own Retirement Income Planner on their website. DW's IRA's are with Fidelity and of the other calculators I use, this one is extremely conservative to the point of dis-belief. I also run simulations on Firecalc, and Financial Engines (through Vanguard).

 

[Alan]

I've now taken the time to read the article in full and I agree with Nord's analysis. There is also no suggestion that the hypothetical examples should actually cut expenses to LBYM or semi-retire taking part-time work to bridge the gap untill SS starts. Much too quick to recommend an annuity to bridge the gap IMHO

 

[d]

while i can't disagree with Nords' specific comments, i think the article would be a useful read for most folks. i did find the analysis of withdrawals re taxes to be interesting, but confusing.

 

[haha]

This article looks pretty good to me. In particular, it could be seen as a useful "on the other hand" look to counter possibly too optimistic assumptions from people already emotionally or economically committed to ER.

I think the only way to feel fully comfortable with whatever it is one wants to do, is to make one’s own calculator, or figure that FireCalc is plenty transparent enough so you know what is wrapped into it.

Still, it helps to remember how scanty the independent data behind it is.

I believe most people leave work early not because they are convinced rationally that it is a sound move, but because they want to leave, so they find arguably rational reasons to feel OK about that.

Of course, having a COLA pension that covers most of one's needs is a completely rational reason to leave early.

The most certain thing that can be said about ER across the board is that it will work out, one way or another.

Ha.

 

[mathjak107]

For the masses the article was just fine.Remember most people have a retirement plan that consists of READY-FIRE-AIM or WORK UNTIL YOU CAN'T .

Nothing wrong with a good dose of reality even if it was to the pessimistic side.

 

[mathjak107]

Sometimes I really wonder if there are some out there who want to just scare the hell out of people so they won't think about retiring and will keep the consumerism mindset.

Don't you love those ads on TV for "financial planners" where one of the things they show you is: What is your dream? What if money were no object? ... and the answer is "start a vineyard." Get real.

I think the point is: If you keep working, you keep consuming at a higher level... and consumerism is good for everyone!

Im pretty sure when we retire we will spend more than we do working.
At least in the early years anyway.

If your active and enjoy doing things time cost money and one thing we will have plenty of is time.  Geesh we cant go out the door on a saturday without dropping a hundred bucks somewhere somehow. Just meeting the kids for a diner lunch is 50 bucks.

 

[tryan]

It's also a powerful reminder of why I only use the company for their cheap custodial services...

Wish this was true for thier 529 .... thier fees are absurb.

 

[Mr._johngalt]

Im pretty sure when we retire we will spend more than we do working.
At least in the early years anyway.

If your active and enjoy doing things time cost money and one thing we will have plenty of is time.  Geesh we cant go out the door on a saturday without dropping a hundred bucks somewhere somehow. Just meeting the kids for a diner lunch is 50 bucks.

My personal taxable income is under 10K and has been for several years. Peak years working it was
in 6 figures. No real significant saving at either level, which means all of the income got spent. The point is that the spending drop from pre to post
retirement was enormous. This was necessary in my case to make it work.
Still, no regrets and no discomfort with my lifestyle.

TH/cfb.............if you are still out there, I know you think all of this is skewed. Just making a point. No debate necessary.

JG

 

[MasterBlaster]

  The implication is that age-55 ERs should limit their SWR to about 3% if they don't want to run out of money in their 90s

Well, if we include the Fidelity expense ratios of one percent or so and their massive marketing and trading/kickback expenses then we get close to what others would call the Firecalc-like 4% SWR.

The SWR needs to account for fund expenses. So with a fidelity activly managed funds the SWR is indeed 3 percent or less.

- Yet another reminder to watch those fees

 

[Nords]

Im pretty sure when we retire we will spend more than we do working. At least in the early years anyway.
If your active and enjoy doing things time cost money and one thing we will have plenty of is time.  Geesh we cant go out the door on a saturday without dropping a hundred bucks somewhere somehow. Just meeting the kids for a diner lunch is 50 bucks.

Our total spending is far less now than during our working years yet we're far more active.

We don't have to buy commuter gas or pay for driving cars 7000 miles/year, we don't have a housecleaner, we're not hiring crews to trim the trees or deal with the green waste, we're not using after-school care, we're not paying for drycleaning... you get the idea.

I find that my entitlement mentality is disappearing. I no longer spend money with the logic of "I've been working really really hard so I deserve this!!" Instead it's "Hmmm, I could spend my time doing this or that. Which am I more interested in?" Our entertainment budget has gone up, but it's a far better thing to be entertaining yourself with surfing & martial arts than to be splurging wads of cash for resort vacations, spa treatments, bar hopping, & fancy dinners.

Enjoying your time doesn't have to cost money-- it's your choice.

 

[mathjak107]

Im not sure what to expect when we retire as far as expenses . We can make do on a lot less probley outside of new york city. Theres barely anything free here anymore,even the museums. wow we went a few weeks ago to the museum, of natural history,it cost the 2 of us to get in , and to see the imax movie 42.00 bucks.

We decided to play tourist for our aniversary and see things in the city we rarely do. It was amazing what it cost us.

We stayed at the essex house by central park ,saw an off broadway show, a few meals and in 2 days went thru almost 2,000 bucks. It was nice though