Fidelity adds new market type to RIP

[wmc1000]

Fidelity has added a new choice in RIP for Significantly Below Average Market result

Definitions from Fidelity site:

Understanding Market Conditions

Significantly Below Average Market
A significantly below average market is defined as the 90% confidence level of estimated future balances and/or estimated future income. The 90% confidence level represents "significantly below average market conditions" with 10% of all hypothetical scenarios tested performing worse. This means that in 90 out of 100 market scenarios tested a hypothetical portfolio similar to yours performed at least as well as the results shown and 10 out of 100 performed worse than the results shown.

Below Average Market
A below average market is defined as the 75% confidence level of estimated future balances and/or estimated future income. The 75% confidence level represents "below average market conditions" with 75% of all hypothetical scenarios tested performing worse. This means that in 75 out of 100 market scenarios tested a hypothetical portfolio similar to yours performed at least as well as the results shown and 25 out of 100 performed worse than the results shown.

Average Market
An average market is defined as the 50% confidence level of estimated future balances and/or estimated future income. The 50% confidence level represents "average market conditions" with 50% of all hypothetical scenarios tested performing worse. This means that in 50 out of 100 market scenarios tested a hypothetical portfolio similar to yours performed at least as well as the results shown and 50 out of 100 performed worse than the results shown.

For more details review the Methodology.

 

[mathjak107]

i remember worst case being 90% success rate since they made the changes quite a few months ago . iwish they had a 100% success rate option as a worst case .

 

[Live And Learn]

They used to have 95% success rate as an option. That was always the one I selected. 90% isn't good enough.

 

[GravitySucks]

They used to have 95% success rate as an option. That was always the one I selected. 90% isn't good enough.

To each their own, but I'm happy to use a 90% success rate to an age I only have about a 10% chance of reaching. Combine the two and you're down to a 1% failure rate.

Think I'll run RIP at the 75% odds at a 10% chance of living and see what I can pull at a 2.5% chance of going broke when I get bored...

 

[MRG]

They used to have 95% success rate as an option. That was always the one I selected. 90% isn't good enough.

I was hoping they'd bring the 95% back. Too bad.

 

[Options]

They used to have 95% success rate as an option. That was always the one I selected. 90% isn't good enough.

Fidelity already views 90% confidence level as being very conservative. From the Methodology section:

...the default confidence level is 90%, which we consider "very conservative" market performance. This means that in 90% of the historical market scenarios run, a target asset mix similar to the current asset mix of your selected account or of another target asset mix that you select for modeling purposes, as appropriate, performed at least as well as the results shown. Conversely, in only 10% of the historical market scenarios run, a target asset mix similar to the current asset mix of your selected account or of another target asset mix that you select, as appropriate, failed to reach the results shown. Fidelity uses this 90% figure so as to err on the side of a more conservative estimation of future market performance.

emphasis added

 

[COcheesehead]

So it looks the change is just the addition of the 75% level. Not sure what good that really does.

 

[tdv2]

The RIP tool is one of the most conservative calculators out there even at 90% confidence level. As far as I'm concerned there is no such thing as 100% confidence. You can look at 100% confidence based on past market performance runs using Firecalc. Worst case from a historical perspective is retiring in 1966, that's where the 4% rule was derived based on a 50-50 stock-bond portfolio. For me I choose to have a cushion from what Fidelity RIP is churning out even at 90% confidence.

 

[foxfirev5]

Looks like we're splitting hairs. RIP or any other calculator gets you in the ballpark. Just plan to stay flexible as we're in uncharted waters.

 

[Options]

The RIP tool is one of the most conservative calculators out there even at 90% confidence level. As far as I'm concerned there is no such thing as 100% confidence. You can look at 100% confidence based on past market performance runs using Firecalc. Worst case from a historical perspective is retiring in 1966, that's where the 4% rule was derived based on a 50-50 stock-bond portfolio. For me I choose to have a cushion from what Fidelity RIP is churning out even at 90% confidence.

+1
Before I retired, I rather religiously ran about 5 different calculators using only MC simulations. Now I run only two and infrequently. I've not been able to find any calculator either that's more conservative than Fidelity's (if anyone else has, please weigh in).

As to looking for 100% confidence in any calculator, see this by Pfau:

Forbes Welcome

As William Bernstein pointed out in Part III of his “Retirement Calculator from Hell” series, post-1926 United States was fortunate to avoid experiencing any truly destructive political, economic, or military crises, which can wipe out a retiree’s wealth. A casual look through world history, though, suggests that such crises occur altogether too frequently.

Focusing solely on investment risk over a thirty or forty-year retirement while excluding these other risks will result in overconfidence. For this reason, Bengen suggests it is meaningless to think about portfolio success rates above 80%.

emphasis added

and this by Bernstein:

The Retirement Calculator from Hell, Part III

A wildly optimistic historian might give us another few centuries of economic, political, and military continuity. Back-of-the-envelope, that’s about an 80% survival rate over the next 40 years. Thus, any estimate of long-term financial success greater than about 80% is meaningless.

emphasis in the original

 

[mathjak107]

fidelity's is the most conservative even at 90% because :

it inflates health and long term care costs automatically by 5.50% .

it uses monte carlo simulations to find even worse case scenario's than historical

it automatically knocks about 15% off your balance first year to assume a downturn day 1 .

so at 90% it pretty much equates to others at 100% unless you manually start changing certain default parameters in the others

 

[COcheesehead]

fidelity's is the most conservative even at 90% because :

it inflates health and long term care costs automatically by 5.50% .

it uses monte carlo simulations to find even worse case scenario's than historical

it automatically knocks about 15% off your balance first year to assume a downturn day 1 .

so at 90% it pretty much equates to others at 100% unless you manually start changing certain default parameters in the others

I didn't realize this. I looked at my numbers and it works out to be about an 8% deduction for me at the start, but that may be based on my asset mix. Thanks for pointing this out. It makes me feel even better about my 140 score.

 

[mathjak107]

i guess they must use a formula , it knocked 15% off our starting number . when we met with our financial team at fidelity i questioned that fact and they said it assumes a year 1 hit .

i retired last july , and i was amazed . i was like how did they know ha ha ha ha

 

[LakeRat1]

I am new to the Fidelity Retirement Calculator ..... Those that have been using this, do you find it good to base decisions on? Have the reports been accurate over time Knowing that there is one new one, how have the other two been for those that have been utilizing this tool ??

 

[mathjak107]

i like it very much . it is as good a guess as it gets

 

[Travelwanted]

Is there a way to access the calculator without having an account at Fidelity?

 

[mathjak107]

no but you can create an account and not fund it until they shut you down .

 

[Options]

I am new to the Fidelity Retirement Calculator ..... Those that have been using this, do you find it good to base decisions on? Have the reports been accurate over time Knowing that there is one new one, how have the other two been for those that have been utilizing this tool ??

No calculator is going to be absolutely "accurate" in forecasting retirement income. A calculator is best used as an educational tool, although I do keep the monthly reports (going back about a year now) and compare them. I use RIP as a guide.

As to your second question, I personally didn't like the new interface at first and still think it could be more user friendly, but I've grown used to it.

 

[Options]

no but you can create an account and not fund it until they shut you down .

I've had an unfunded account for more than a few years and have had no problems, not even email spam or junk mail. Schwab, OTOH, who I opened a free checking account with a year ago but never funded as I changed my mind, will not stop sending me junk mail.

 

[Taxman59]

I am new to the Fidelity Retirement Calculator ..... Those that have been using this, do you find it good to base decisions on? Have the reports been accurate over time Knowing that there is one new one, how have the other two been for those that have been utilizing this tool ??

I have used it for planning for about 6 years. It seems to be the best one out there for allowing the detailed spending by category. The results have been consistent which is all I could ask.


Have the day you deserve, and let Karma sort it out.

Sent from my iPad using Early Retirement Forum

 

[LakeRat1]

I have been using it for about three years now, I did base my decision to leave the workforce on the #'s I was seeing

 

[MRG]

I have been using it for about three years now, I did base my decision to leave the workforce on the #'s I was seeing

+1

I based my retirement on it as well. I've been using it 6 years, 3 planning and 3 retired. I didn't save off any reports but due to an excellent market I'm not they provide value today.

Sent from my SAMSUNG-SM-G920A using Early Retirement Forum mobile app

 

[Options]

+1

I based my retirement on it as well. I've been using it 6 years, 3 planning and 3 retired. I didn't save off any reports but due to an excellent market I'm not they provide value today.

Sent from my SAMSUNG-SM-G920A using Early Retirement Forum mobile app

I only starting saving the monthly outputs in PDF format last year as I wanted to get an idea of their accuracy. Also wanted to be able to compare from year to year, and more than once I've gone back and done such a comparison when doing things like invetistigating different tax strategies and AA allocations. Whether I will continue to do so and at what intervals is something I've yet to decide on yet, but I do like the idea of having additional data points.

 

[explanade]

I looked for the RIP, to update the analysis but they no longer have it.

Instead they call it Fidelity Retirement Analysis. I don't recall logging in before to do the RIP runs but now FRA prompts you and when I log in, it has all the old data I'd previously entered in there so I must have logged in before.

I updated some data and ran it again. The data returned are similar to what RIP produced, with beginning and ending assets. Instead of confidence levels like 90 or 95%, it returns Average and Significantly Below Average results.

It's a huge difference, as Average shows ending assets value at more than twice the beginning assets value whereas Significantly Below Average results in ending assets value at less than half of the beginning assets value.

One thing is that they don't let you select the inflation rate like they did with RIP. They say they will in the future but they're using 2.5% and they reduced health care inflation from 7 to 5.5%.

They flag health care as a long term potential concern, even though 40 years from now, I still end up with a significant sum with Significantly Below Average market returns.

What that is about is suggesting to you that you account for long-term care. In the expenses section, you can check a box for supplemental insurance such as medigap and another box for LTC. I hadn't checked either so I get a red flag. When I checked supplemental, it turned to yellow.

In the end you can save a PDF and it will generate year by year tables for beginning and ending balance, withdrawal, etc. just as FRIP did. They have tables for both Significantly Below Average and Average market return scenarios.

 

[COcheesehead]

I looked for the RIP, to update the analysis but they no longer have it.

Instead they call it Fidelity Retirement Analysis. I don't recall logging in before to do the RIP runs but now FRA prompts you and when I log in, it has all the old data I'd previously entered in there so I must have logged in before.

I updated some data and ran it again. The data returned are similar to what RIP produced, with beginning and ending assets. Instead of confidence levels like 90 or 95%, it returns Average and Significantly Below Average results.

It's a huge difference, as Average shows ending assets value at more than twice the beginning assets value whereas Significantly Below Average results in ending assets value at less than half of the beginning assets value.

One thing is that they don't let you select the inflation rate like they did with RIP. They say they will in the future but they're using 2.5% and they reduced health care inflation from 7 to 5.5%.

They flag health care as a long term potential concern, even though 40 years from now, I still end up with a significant sum with Significantly Below Average market returns.

What that is about is suggesting to you that you account for long-term care. In the expenses section, you can check a box for supplemental insurance such as medigap and another box for LTC. I hadn't checked either so I get a red flag. When I checked supplemental, it turned to yellow.

In the end you can save a PDF and it will generate year by year tables for beginning and ending balance, withdrawal, etc. just as FRIP did. They have tables for both Significantly Below Average and Average market return scenarios.

They call it RPM, Retirement Preparedness Measure. What I like about the new one is they let you create a very detailed budget right in the tool and give you categories that you might overlook. I like it.