Fidelity RIP tool

[tdv2]

i am not thrilled with the fact it anticipates a drop in assets of 10-15% right at the first year .

it knocks 300k off our january balance and starts all calculations from that point

I get a similar result with my numbers. In my first year of retirement the model hair cuts my asset balance by about 9%. My current allocation is 55/35/10 equity/bonds/cash.

 

[Corporateburnout]

If the market continues its last two day decline for the next ten trading days the tool's portfolio prediction will be accurate.

 

[mathjak107]

you think they knew ? ha ha ha ha

 

[Options]

some interesting things i learned about the planner .

inflation adjusting is driven by the type of expenses.

general goods and services are currently at 2.50% , healthcare at 7 % , fixed rate mortgages are zero % . long term care costs 5.505

Where did you see this explained? I looked for it and couldn't find it.

I like the idea of estimating effective tax rates by running tax calculations for future set of years. I'd have to do it five times, though, if I wanted to do it right because DW and I are 2 years apart. Both <65, One >65, Both >65, One >70, Both>70. Those ages, of course, correspond to going on Medicare, Social Security, and RMD's.

BTW, You should not have to re-purchase ESPlanner unless it was a real old version. I'd just call them and tell them what happened...I'd bet they'd give you a fresh copy.

Yes, that's what I did, based on my situation: ran tax calculations for 62-65, 65 (to reflect large capital gains that year), 66-70, and 70-95. I have a much higher degree of confidence using tax software than using i-orp, as has been suggested. From the tax software results, I decided on the strategy I outlined above.

Thanks for the heads up regarding calling to replace my old version ESPlanner--I'll do that!

 

[mathjak107]

it is all in the methodoloy pdf

"7. HEALTH CARE INFLATION ASSUMPTIONS
The tool makes the following inflation assumptions and does not
allow you to change these inflation rates.
UÊÊHealth Care Costs: The default inflation rate of health care costs
is 7%. This figure is based on a study by the Centers for Medicare
& Medicaid Services (CMS) (an agency of the U.S. Department of
Health and Human Services) estimating growth in health care
costs between 2001 and 2011.
UÊÊLong-Term-Care Costs: The default inflation rate of long-termcare
costs is 5.5% modeled in the what-if scenarios. This figure
is based on a study by the Centers for Medicare & Medicaid
Services (an agency of the U.S. Department of Health and Human
Services) estimating growth in long-term-care costs between
2001 and 2011.
UÊÊLong-Term-Care Insurance Premiums: The default inflation rate
of long-term-care insurance premiums entered in the Budget
Worksheet is 0%. This figure is based on the assumption that
your insurance premiums are fixed and level


http://personal.fidelity.com/planning/retirement/pdf/rip_methodology.pdf

 

[Options]

Thanks, I don't know how I missed that. Based on their assumptions, I'm probably overestimating health care costs. Oh well, more "padding".

 

[mathjak107]

the way these markets have been anything that pads things is a plus .

 

[tdv2]

the way these markets have been anything that pads things is a plus .

I'm still getting numbers that work with quite a bit of additional padding. I would rather error on the side of caution.

 

[mathjak107]

yep , i always pictured myself as being the poster child fo the year the 4% swr failed ha ha ha . from the moment i retired in august we have been in a slide .

 

[stepford]

yep , i always pictured myself as being the poster child fo the year the 4% swr failed ha ha ha . from the moment i retired in august we have been in a slide .

Nothing like a 5% slide in asset values in your last few months of work to test your resolve to ER. No more OMYs!

 

[bingybear]

yep , i always pictured myself as being the poster child fo the year the 4% swr failed ha ha ha . from the moment i retired in august we have been in a slide .

I've always figured I'd be the poster child independent of the WR.
Much of this thread has turned academic to me as the only pension like thing is SS. But I wonder if you look at a non-cola pension using today's dollars, does the payout shrink over time (as it should).
Both of our pensions vanished in the tech bust.
I usually run these planners with 1/4 of investable assets omitted, just too lazy to port the data from other brokerages. note FV doesn't work with multiple authentication security measures.
One question about the new RIP, does it use the same inflation rate for spending and COLA? If yes, do you think that is realistic based on retiree spending?

 

[mathjak107]

while study's show we tend to slow spending as we age i am not so sure anymore . it looks like it just shifts from ourselves to our grand kids or kids .

these are all ball parks at best so i don't use them for much except getting to the gate of retirement .

 

[bingybear]

while study's show we tend to slow spending as we age i am not so sure anymore . it looks like it just shifts from ourselves to our grand kids or kids .

these are all ball parks at best so i don't use them for much except getting to the gate of retirement .

+1

 

[DEC-1982]

Seeing how the equity market for this year has started, I am grateful for FIDO RIP putting out an ugly scenario for me. It expects the average return for my portfolio for the first 5 years to be something like 0.30% and a 10% drop for 2016. And that is including my bonds and my cash, not just equities.

I know it's just a tool, but it was a good eye opener for me to expect a bad 5-year start as one of many possible scenarios.

 

[mathjak107]

amen to that . i just retired .

 

[nwsteve]

This low growth element to the near term values is one of the nuanaces of RIP, I am not really solid on understanding. Since they are using Monte Carlo simulations, isn't it really more of a "fitting" of a market cycle scenario to a period vs a "forecast" per se?
Any clarity by the members is appreciated.
I have also observed what appears to be a noticeably more conservative modeling from Fido in the new RIP vs the old one. The tax treatment methodology particularly makes a hit on ending values, IMHO.
Nwsteve

 

[Options]

This low growth element to the near term values is one of the nuanaces of RIP, I am not really solid on understanding. Since they are using Monte Carlo simulations, isn't it really more of a "fitting" of a market cycle scenario to a period vs a "forecast" per se?
Any clarity by the members is appreciated.
I have also observed what appears to be a noticeably more conservative modeling from Fido in the new RIP vs the old one. The tax treatment methodology particularly makes a hit on ending values, IMHO.
Nwsteve

I do wish they'd do a better job of explaining their methodology. Attempting to guess and then apply this "educational tool" to one's individual situation isn't helpful to users at all, IMO. OTOH, I've found its conservative modeling mode to be the most negative of all tools so I do start from there.

 

[nwsteve]

Seeing how the equity market for this year has started, I am grateful for FIDO RIP putting out an ugly scenario for me. It expects the average return for my portfolio for the first 5 years to be something like 0.30% and a 10% drop for 2016. And that is including my bonds and my cash, not just equities.
QUOTE]

Keep in mind, also, that the RIP tool takes out of your portfolio your budgeted annual spending at the beginning of the year. So, in effect, you will be down your withdrawal percentage net of any gains in the portfolio. For example, if you took the infamous 4% withdrawal and the market only provided dividends and growth of 2%, you are starting 2017 at 2% lower.
At least, that is how I understand it works. Notice when you look at your spreadsheets from the tool now start with the 2017 year.
Nwsteve

 

[Steelart99]

I had an issue the other day with imported account data that FID did not "recognize". There was no way to input an AA against those accounts (mostly company managed retirement funds). So now I question the analysis of my situation. I posted a suggestion to them to allow manual input of AA against those types of imported funds.

Does anyone know of a way around this?

FWIW ... I'm only a few months away from my "Planned" ER ... who the heck decided to bash my portfolio just before I was get to FIRED?

PS: I was just on the RIP site and they'd lost the link to several of my imported accounts ... <sigh> ...

 

[tdv2]

As others have said, the under performing market scenario does hit your portfolio hard in the initial retirement years. As we all know, this is basically the worst case scenario from a sequence of returns standpoint. It is certainly one of the most conservative tools out there....this, for me, is one of the reasons I like to use it.

 

[DEC-1982]

Keep in mind, also, that the RIP tool takes out of your portfolio your budgeted annual spending at the beginning of the year. So, in effect, you will be down your withdrawal percentage net of any gains in the portfolio. For example, if you took the infamous 4% withdrawal and the market only provided dividends and growth of 2%, you are starting 2017 at 2% lower.
At least, that is how I understand it works. Notice when you look at your spreadsheets from the tool now start with the 2017 year.
Nwsteve

nwsteve, thanks for bringing this up but my calculations account for withdrawals.

=(B2-(B1-C1))*100/(B1-C1)
where B is beginning assets at the start of the year and C is withdrawal at the start of the year

Anyway, these are all estimates.

 

[Steelart99]

Is there a way to remove linked accounts in the RIP tool? I want to use the manual input (since FID lost the links I put in) ...but now, some of the data is back. Messy.

 

[tdv2]

Is there a way to remove linked accounts in the RIP tool? I want to use the manual input (since FID lost the links I put in) ...but now, some of the data is back. Messy.

The answer is Yes. Go into the tool and run the analysis. Click the blue Accounts & Income Sources button on the left side halfway down the page, then click the + next to accounts. You can edit or delete the unwanted accounts from this page.

 

[Ticker]

Seeing how the equity market for this year has started, I am grateful for FIDO RIP putting out an ugly scenario for me. It expects the average return for my portfolio for the first 5 years to be something like 0.30% and a 10% drop for 2016. And that is including my bonds and my cash, not just equities.
QUOTE]

Keep in mind, also, that the RIP tool takes out of your portfolio your budgeted annual spending at the beginning of the year. So, in effect, you will be down your withdrawal percentage net of any gains in the portfolio. For example, if you took the infamous 4% withdrawal and the market only provided dividends and growth of 2%, you are starting 2017 at 2% lower.
At least, that is how I understand it works. Notice when you look at your spreadsheets from the tool now start with the 2017 year.
Nwsteve

so are you saying that you would take your distributions at the beginning of the year as a lump sum? I would think that a monthly distribution would be preferable. allowing time for those assets to grow throughout the year.

 

[wmc1000]

for modeling purposes FIDO RIP takes it on the 1st of ea. year. You can choose to take distributions however works best for you.