Fidelity RIP tool

[Options]

On the long run into retirement I used to use the Financials Engine tool available through the Vanguard site but these days I prefer the FRIP and FIRECALC calculators.

FIRECALC and *****, using historical data, definitely provide more optimistic scenarios. I always liked FRIP because of the "underperforming market"/90% confidence option (although as noted above the 95% confidence level has been removed).

Now I don't know what to think as the new results show only the tax bracket one is assumed to be in, while the former version showed exact yearly amounts of estimated taxes to be paid, without any mention of a tax bracket. So to me comparing results from the old to the new version is like comparing apples and oranges. Worst, the former version showed me paying some taxes (albeit low), and now I'm assumed to be in a "0" tax bracket, which makes no sense. When I use the tax calculator provided, I'm given a 9% federal/2% state (CA) tax bracket, which isn't useful because it fails to take into account taxable accounts/roths, etc.

 

[Alan]

FIRECALC and *****, using historical data, definitely provide more optimistic scenarios. I always liked FRIP because of the "underperforming market"/90% confidence option (although as noted above the 95% confidence level has been removed).

Now I don't know what to think as the new results show only the tax bracket one is assumed to be in, while the former version showed exact yearly amounts of estimated taxes to be paid, without any mention of a tax bracket. So to me comparing results from the old to the new version is like comparing apples and oranges. Worst, the former version showed me paying some taxes (albeit low), and now I'm assumed to be in a "0" tax bracket, which makes no sense. When I use the tax calculator provided, I'm given a 9% federal/2% state (CA) tax bracket, which isn't useful because it fails to take into account taxable accounts/roths, etc.

I never paid any attention to the assumed tax brackets because for me they will vary a lot due to the Roth conversions I choose to do each year and will drop dramatically when I stop doing Roth conversions, and start doing Roth withdrawals.

 

[Options]

I never paid any attention to the assumed tax brackets because for me they will vary a lot due to the Roth conversions I choose to do each year and will drop dramatically when I stop doing Roth conversions, and start doing Roth withdrawals.

Yes I intend to do Roth conversions as well. but in the former version it gave the tax detail so at least you had the ability to see what their assumptions were. Now you do not.

 

[daylatedollarshort]

For me the tax detail was one of the main features RIP had over the other retirement planners. I'll probably look for something else to use now for a planner. I'm not a fan so far of the new reports without the taxes and minimum required distributions listed year by year. If they are still there somewhere I can't find them

Added -

I found the minimum distributions on the downloaded report, but the numbers look way low for me. Like crazy way low compared to the old RIP. Is anyone else seeing this?

 

[bUU]

My plan is now failing but I noticed it is missing a fairly large cash account. It is not including it in the analysis and calls it unassigned as all the other accounts are tagged retirement.

I had similar problems since I started using RIP years ago, with certain non-Fidelity accounts. I just refresh the data each time I use RIP and print (to PDF) a report before I save.

 

[Moneygrubber]

Justva heads up, i had pension info in the old rip, lump sum and annuity scenarios, the new rip turned both options on so i was getting the ls and annuity. Had to set ls value to 9 to run.


Sent from my iPhone using Early Retirement Forum

 

[Moneygrubber]

I mean 0 not nine.... Duh


Sent from my iPhone using Early Retirement Forum

 

[Options]

For me the tax detail was one of the main features RIP had over the other retirement planners. I'll probably look for something else to use now for a planner. I'm not a fan so far of the new reports without the taxes and minimum required distributions listed year by year. If they are still there somewhere I can't find them

Added -

I found the minimum distributions on the downloaded report, but the numbers look way low for me. Like crazy way low compared to the old RIP. Is anyone else seeing this?

Emphasis added.

+1

Will probably use something else now as well, probably ESPlanner as it as conservative as FRIP and provides tax detail (as well as lots of other detail, which is why FRIP and ESP, aside from being the most conservative, were my calculators of choice).

Just checked RMD's, and they approximate ones from before. I remain uncomfortable being unable to see FRIP's tax assumptions other than an assumed tax bracket.

 

[Peter]

I found the tax amounts generated by the old RIP to be inaccurate. Actually, in some cases they made no sense at all. I questioned a rep at Fidelity and he told me to take no notice of the tax amounts; they were aware that in some cases they are wildly wrong.

I suspect this is why they have changed the tax part of the new tool.

 

[daylatedollarshort]

I found the tax amounts generated by the old RIP to be inaccurate. Actually, in some cases they made no sense at all. I questioned a rep at Fidelity and he told me to take no notice of the tax amounts; they were aware that in some cases they are wildly wrong.

I suspect this is why they have changed the tax part of the new tool.

My first thoughts from seeing the detail tax part removed is the less detail the less Fidelity could be held accountable for errors. The output is a bit strange to say the least, as the detail columns don't add up to the total columns since taxes aren't shown or even included in total expenses - just implied somewhere while apparently residing somewhere off into the ether.

It makes it hard to check their numbers for accuracy or even a basic reasonableness check.

 

[Options]

I found the tax amounts generated by the old RIP to be inaccurate. Actually, in some cases they made no sense at all. I questioned a rep at Fidelity and he told me to take no notice of the tax amounts; they were aware that in some cases they are wildly wrong.

I suspect this is why they have changed the tax part of the new tool.

Your statement is concerning. I find it odd FRIP would bother to put in tax amounts in the old version only to have a Fidelity rep to say "take no notice" of those amounts. What else, then, in the calculator should we "take no notice" of? Either that rep was wrong or the calculator was wrong...somewhere.

I found the tax amounts in ESPlanner roughly matched those in FRIP. Almost 2 of every 3 of my PF $ are in after-tax/Roth, so I'm not worried so much about it, particularly since I plan to do Roth conversions. What I am concerned with is the usefulness of this new version.

 

[Alan]

I found the tax amounts in ESPlanner roughly matched those in FRIP. Almost 2 of every 3 of my PF $ are in after-tax/Roth, so I'm not worried so much about it, particularly since I plan to do Roth conversions. What I am concerned with is the usefulness of this new version.

I've not used ESPlanner but I don't recall FRIP ever having any inputs to allow one to indicate the amounts of future income to be from regular income, qualified dividends, cap gains, ROTH withdrawals etc, or to estimate tax lowering deductions from mortgages, HSA's, charitable giving etc. I had always assumed that the tax estimates old FRIP were rough calculations anyway. This simplified version of stating one's expected effective tax rate is probably better imo, but that rate is not going to be consistent year on year over my retirement, but it is very easy to tinker with based on my actual returns.

 

[Options]

I've not used ESPlanner but I don't recall FRIP ever having any inputs to allow one to indicate the amounts of future income to be from regular income, qualified dividends, cap gains, ROTH withdrawals etc, or to estimate tax lowering deductions from mortgages, HSA's, charitable giving etc. I had always assumed that the tax estimates old FRIP were rough calculations anyway. This simplified version of stating one's expected effective tax rate is probably better imo, but that rate is not going to be consistent year on year over my retirement, but it is very easy to tinker with based on my actual returns.

Emphasis added

I assumed the same, and neither FRIP or ESPlanner allowed for the tax inputs you mentioned (I'm not sure that's even possible, given the endless combinations). ESPlanner allows one to decide withdrawal order of taxable, non-taxable, and roth. The old version of FRIP didn't do this, but IIRC the methodology explained that withdrawals were assumed to be made in the order of taxable, non-taxable, and then ROTH.

My intention was to use FRIP and ESPlanner to compare my year end balances to their estimates based on worst case scenarios. IMO, the value of FRIP is precisely their year end net worth estimates which can be used as comparison to see if one is "on track", more or less (much like those who use spreadsheets to do the same).

How can a tax bracket be valuable? In my case, it stated I would be in the zero tax bracket throughout retirement. How is this even possible, and how is it actionable given no explanations are given for how this conclusion was reached?

 

[daylatedollarshort]

I've not used ESPlanner but I don't recall FRIP ever having any inputs to allow one to indicate the amounts of future income to be from regular income, qualified dividends, cap gains, ROTH withdrawals etc, or to estimate tax lowering deductions from mortgages, HSA's, charitable giving etc. I had always assumed that the tax estimates old FRIP were rough calculations anyway. This simplified version of stating one's expected effective tax rate is probably better imo, but that rate is not going to be consistent year on year over my retirement, but it is very easy to tinker with based on my actual returns.

Good points, but I thought I could count on them for a somewhat reasonable approximation of MRDs and associated tax consequences. I guess better to find out now I probably should delve into that more myself.

I still have not figured out why our MRDs went so low but it is not giving me warm fuzzies since they are the ones who converted the data, not me and I have the printouts with MRDs from the old versions with the higher and more realistic looking amounts. One tax bracket throughout retirement is kind of useless for us because of varying income streams, especially MRDs, as we are taking the ACA credits now instead of doing Roth conversions.

 

[Alan]

How can a tax bracket be valuable? In my case, it stated I would be in the zero tax bracket throughout retirement. How is this even possible, and how is it actionable given no explanations are given for how this conclusion was reached?

It is not a tax bracket that the new FRIP provides, it is an expected effective tax rate, which is tax paid divided by gross income, so you can easily calculate that from your past tax returns, and estimate it for returns in the future.

A default effective tax rate of zero means, like FIRECALC, it is not going to calculate any taxes at all, so you would have to allow for taxes in your expense estimates. With no taxes estimated then it really is up to the user to estimate taxes based on his personal circumstances incluing the magnitude and order of withdrawals from after tax, deferred tax, and tax free accounts.

 

[Options]

My mistake: I was thinking effective tax rate but said tax bracket. Your explanation makes sense, but the overall usefulness of this tool now remains suspect to me.

 

[Jack_Pine]

This is still my goto planner, even with the tax "issue". I like the ease of use and the detailed expense planner built in.

 

[mathjak107]

mine too . i find it one of the best .

 

[rodi]

Ok - Some stuff must have changed because I had not had a shortfall for underperforming, prior. I went through and relooked at my detailed expense worksheet and had to add in (don't remember if I'd done this earlier) changes in expenses once the kids are off my healthcare, phone plan, etc. I also noticed that it treated my rental income a little different, but when I modeled it as a pension with joint survivorship and future dollars (inflation) it seemed to make more sense when I looked at the income through the years.

It definitely is a pessimistic view of the future, using the underperforming model. I barely squeak by to age 95 (small remaining portfolio.) If I change it to average - I suddenly am leaving my kids HUGE inheritances.

Question - the underperforming model.... Does that assume we'll have crappy returns for the full 40+ years of retirement? I guess that's as conservative as you get!!!!

 

[Jack_Pine]

Question - the underperforming model.... Does that assume we'll have crappy returns for the full 40+ years of retirement? I guess that's as conservative as you get!!!!

Have the same question. Am going to look if they give any color to the two choices.

 

[Options]

This is still my goto planner, even with the tax "issue". I like the ease of use and the detailed expense planner built in.

The introductory message states it is an educational tool only, and should not be used for retirement or tax planning purposes. After rereading the tax section in the methodology, I find it even more useless. Tax assumptions, like fees or returns assumptions, affect everything from assumed returns to PF value to RMD's. Taken in totality, how can this be useful? As a guesstimate?

To Rodi's point in his question above, running the calculator last night and tonight my ending PF is somehow almost $50K less than it was last night, with no changes to the inputs. Did the calculator get even more conservative in the last 24 hours? Definitely a WTF moment.

I have concerns basing my financial future on any "educational" tool. It may as well be "for entertainment purposes only".

 

[Jack_Pine]

I don't think you can rely on any of these "calculators" to be 100% IMHO. I have run it a lot of times over the last few days and it only changed when I changed input, but could just be me. I regularly run 3-4 of these tools and make my own choices based on my view of all the results, YMMV.

Use what you are comfortable with.

 

[Options]

Yes, and the merits/drawbacks of relying on the various calculators has been discussed here and elsewhere. I know many here use FIRECALC/*****, Financial Engines (though not as much), etc., but I am uncomfortable extrapolating historical returns. I am also uncomfortable estimating future returns using calculators such as IORP due to behavioral bias. Same goes for spreadsheets.

FRIP is the most conservative I've seen, followed by ESPlanner, and both use MC analysis, which I'm comfortable with (despite, or perhaps because of, Otar). Their value to me is they provide a psychological cushion against worst case scenarios, such as a bad sequence of returns (having just retired, this is personally important to me). Now FRIP is no longer a part of that equation. YMMV.

One good thing to come out of this is I have decided to go back and do a more detailed analysis of tax expense in retirement, so it could be said Fidelity did me a favor.

 

[OrcasIslandBound]

How to tell if you are in a "poor" market, or an "average" market: Use the report generated by this new RIP tool. Take a look at the columns showing "% of savings withdrawn" and "Ending Savings". Compare these two columns for the "under performing" table and the "average" table. The important part is that in an under performing market, the % withdrawals will be much higher. Even scary high. In my report, the DW plans to take SS at 62 and I plan to take it at 70. In the under performing market, my % withdrawal climbs steadily from 6 - 8% until I reach 70, then it drops back to 4%. In the average market, it starts off at 5.1% then gradually drops to 4.5% at my age of 69, then drops to 2.4% or less until we are both gone.

This % combined with total of investments provides a good barometer for continuously seeing if we are on track during our retirement.

 

[Senator]

The introductory message states it is an educational tool only, and should not be used for retirement or tax planning purposes.

Actually, it says
"We just wanted to remind you that the Fidelity Planning & Guidance Center is provided for your education only. You shouldn't use what you learn here as the primary basis for investment or tax-planning decisions."

A somewhat standard disclaimer.

Question - the underperforming model.... Does that assume we'll have crappy returns for the full 40+ years of retirement? I guess that's as conservative as you get!!!!

Per the help. "An underperforming market is defined as the 90% confidence level of estimated future balances and/or estimated future income. The 90% confidence level represents "underperforming market conditions" with 10% of all hypothetical scenarios tested performing worse. This means that in 9 out of 10 market scenarios tested a hypothetical portfolio similar to yours performed at least as well as the results shown and 1 out of 10 performed worse than the results shown.

An average market is defined as the 50% confidence level of estimated future income. The 50% confidence level represents "average market conditions" with 50% of all hypothetical scenarios tested performing worse. This means that in 5 out of 10 market scenarios tested a hypothetical portfolio similar to yours performed at least as well as the results shown and 5 out of 10 performed worse than the results shown. For more details review the Methodology."