Fidelity RIP tool

[daylatedollarshort]

Again I realized why I'm not a huge fan: like most tools, it's calculations are opaque.

I agree, but for what it is worth they pass the bounds of reasonableness tests compared to my own spreadsheets, too. The results are in the same ballpark.

A retirement tool from 20 years ago using accurate tax rates of that time period may not have really been that useful in predicting today's tax rates and deductions, so maybe using the one effective tax rate isn't such a big deal. Anyway that is how I'm rationalizing the loss of the old tool.

 

[onno]

Received a return call from Fidelity. In short, they know it's broken as far as things not coming over from Full View. They'll roll out a fix early next year, hopefully Q1. Until then, set up manual accounts for those accounts that don't come over from Full View. Pretty easy.

I looked around at other Planners about a year ago. I think I'll pick up where I left off. I'm open to suggestions.

 

[nwsteve]

Has anybody seen "surprises" in estimated RMD values? Besides, starting my RMD a year early (have birthday in Sept) an issue they say is being fixed, I also have RMD amounts that are 12-18k lower than the previous model. When I run the separate RMD tool (not in the RIP), I get values more like I use to see in the old RIP.
The Fido rep thought it was a function of choosing an underperforming market but my old RIP version were tied to the 90% level as well. This is particularly puzzling since the model also assumes taxable accounts are used prior to taping TIRA balances, the estimated IRA balance amounts are not likely to be too different than today and could be much higher (3 years to my first RMD). My asset allocations in the TIRAs are 45% equity 55 ST/Bonds.
Anybody got any thoughts on the shift or is it a glitch?
Nwsteve

 

[mathjak107]

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

 

[mathjak107]

another new tool fidelity has up is the income planning tool . very interesting 28 page report from that tool which i still have to review .

 

[Corporateburnout]

another new tool fidelity has up is the income planning tool . very interesting 28 page report from that tool which i still have to review .

Is this new tool on the website?

 

[mathjak107]

yes it is under the tools section . fidelity income strategy evaluater

 

[Corporateburnout]

yes it is under the tools section . fidelity income strategy evaluater

Thanks. It looks like a nice tool.

 

[brianc629]

Pension cola

The planner does not appear to account for pensions that are cola'd. I know Firecalc allows you to specify pensions that are cola'd or not cola'd, but I don't see that option in RIP. And looking at the results, it appears to assume no cola. Is this what others have found?

 

[Options]

After this chat about the updated tool in Fidelity, I went in and ran through it again. Again I realized why I'm not a huge fan: like most tools, it's calculations are opaque.

Some of the things I ran into...

* The 2015 expenses are significantly higher than 2016 and onward. I didn't see anything within the expense inputs where a one-time expense would have been lurking. The PDF report didn't provide any clues that I could find.

Interesting. I didn't have this issue. Did you vary any expenses with start and end dates? That could account for it.

* I liked that they allow you to put medigap expense in with start/end dates...that's good feature.

I'm planning on MA plans so I missed that feature.

* Roughly aligns with my spreadsheets and i-orp.

* Chunking in a single federal tax rate seems a little crude.

Below is how I got around effective tax rate as well as using i-orp

The bottom line for me is that the user must simply have faith that it's working right, and that it's not doing anything dumb. I did click on the report, and it shows values calculated, one row per year, but the values they show are not enough to explain what's going on behind the scenes. A nice addition, but I wouldn't make it my primary tool.

Yes. The lack of detail makes me nervous, but we do what we must and adjust as things become clearer. FRIP and ESPlanner have always my preferred calculators as they have always been the most conservative AFAICT. After losing ESPlanner software in a recent computer crash, I may repurchase.

Here's how I dealt with the effective tax rate:

1) 2 of every 3 PF $ are already in after-tax
2) delaying SS until 70
3) doing roth conversions until 70
4) leaves approx $100K in RMD's @ 70 using 4% tIRA growth projection from 60-70 (yes I know 4% is a forecast, but as samclem pointed out [-]above[/-] in this thread (or another?), if PF grows more than that the only downside is I'll have larger PF to take RMD's from--not a bad problem to have)
5) created dummy tax return for years until 70 during roth conversions to estimate effective tax rate, then created another dummy return from 70-95 (end of plan) to estimate ETR when SS and RMD's commence.
6) ETR is 3% until 70, then 0% thereafter due to roth conversions
7) used 3% as ETR in FIDO for duration of retirement (for "padding").

I didn't need i-orp to see the advantage of roth conversions until 70. No conversions causes higher RMD's and SS benefits taxation.

 

[nwsteve]

The planner does not appear to account for pensions that are cola'd. I know Firecalc allows you to specify pensions that are cola'd or not cola'd, but I don't see that option in RIP. And looking at the results, it appears to assume no cola. Is this what others have found?

I have not verified in the new RIP but I believe you indicate on the setup page for your pension if it is cola or not. It is a check box so you may have "stare" at the page to find it.
If I could not find it, I would probably try setting up a "new" pension to see if it presents the cola option. Pretty sure you will see it there. Then just delete the" old" non cola input.
Nwsteve

 

[mathjak107]

i can't find any way to cola adjust anything i add in either . i tried all the types of accounts they show

 

[sengsational]

Here's how I dealt with the effective tax rate:<snip>

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.

 

[Cobra9777]

The planner does not appear to account for pensions that are cola'd. I know Firecalc allows you to specify pensions that are cola'd or not cola'd, but I don't see that option in RIP. And looking at the results, it appears to assume no cola. Is this what others have found?

i can't find any way to cola adjust anything i add in either . i tried all the types of accounts they show

Same here. Apparently, the tool assumes all pensions are non-COLA. Here's a quote from the "Help & Methodology" link:

Estimates of future pension benefits are not adjusted for the Tool's inflation rate.

I have not verified in the new RIP but I believe you indicate on the setup page for your pension if it is cola or not. It is a check box so you may have "stare" at the page to find it.
If I could not find it, I would probably try setting up a "new" pension to see if it presents the cola option. Pretty sure you will see it there. Then just delete the" old" non cola input.

I think I found the check box you are referring to. However, checking or unchecking does not adjust future pension benefits for inflation. It just adjusts the starting amount from today to the start date. Here's what pops up when you click the "What is this?" link next to the check box:

Checking this box makes it so that this income source is valued at the time you expect to receive it for the purposes of your retirement analysis, accounting for inflation and the number of years until you reach the age at which you expect to begin receiving it. Otherwise, your analysis will reflect this income source valued in today's dollars.

 

[mathjak107]

kind of silly it increases expenses every year but social security and pensions never get a cola . it makes no sense

 

[Cobra9777]

kind of silly it increases expenses every year but social security and pensions never get a cola . it makes no sense

I'm no expert on this tool. I just dabble with it from time to time. But I think it's intended for everything to be viewed in today's dollars. My Private Client adviser always wants me to look at it that view. My mind only works in nominal dollars.

In any case, on the results page, when you choose 'Future Dollars', it does appear to inflate pensions and SS. Likewise, when you select 'Today's Dollars', expenses appear to NOT be inflated. Problem is, we have two pensions... one COLA, one not. The 'Future Dollars' option inflates both, which is clearly wrong. So there needs to be a place to specify.

However, I just discovered a workaround, which is to set up the non-COLA pension as a "Fixed Income Annuity." When I do that, future payments are not inflated under the 'Future Dollars' results view.

 

[mathjak107]

funny i saw the reverse . when i hit future dollars on my wifes pension each year it showed the pension worth less . then i got out of the calculator for a few hours . when i went back in it showed the pension inflation adjusting

 

[nwsteve]

kind of silly it increases expenses every year but social security and pensions never get a cola . it makes no sense

I agree Mathjak, regarding the lack of cola for other income streams. Social Security seems to be the only future income stream receiving a cola. You can also get cola if you enter the income stream as "Govt pension" when you setup the item. I have spousal SS benefit and RIP is inflating it as well as my DW's stream. Perhaps that is a workaround? You do have to pick the Future Dollar tab at top of page BEFORE you go to the cash flow schedule to see the inflation value under the income tab.
I have rental property and had previously entered in the old RIP the income to be cola, but that function seems to be gone.
Cobra is correct regarding "use Future Dollars" function only adjusting initial values to only inception date. I am pretty sure this is a change from the old RIP as well since my rentals previously would receive cola when adjustment if I selected that option.
I have pinged my Fido rep about what happened to the cola option for other income.
Nwsteve

 

[mathjak107]

i have it inflation adjusting my wifes pension and our social security now . but i can't get it to do the spousal benefit adders . i can only seem to enter them non adjuting . .

 

[Cobra9777]

nwsteve, it sounds like mathjak and I both have pensions and SS inflating properly in the future dollar view. I have rental income also. I just checked and it is inflating also. My only problem was a non-COLA pension that I had to enter as a "fixed income annuity" to prevent inflation in the future dollar view. I agree it would be preferable to have a COLA/non-COLA switch for each income stream.

 

[mathjak107]

i used pension for entering the spousal benefits as they kick in .

we met with our fidelity team yesterday and got to see their new social security optimizer which is for in house only .

it is able to do some pretty wild calculations and instant comparisons to come up with the biggest bang for the buck .

so it utilizes an early benefit that gets stopped after a few years and restarted again at 70 . it has me filing restricted application and delaying until 70 and then when i am 70 it has my wife getting a nice adder to her benefit off my record .


so it had a lot of money coming and going at different times so you can't just enter it as a ss benefit .

th pension entry let me enter it so it inflation adjusted

 

[nwsteve]

Just got the following clarification back from my Fidelity Rep on mechanics to make COLA work on income stream.
"Great question. In order to have a COLA reflected in the RIP tool, you'll need to select the "adjust to future dollars" box. Then once you run the analysis, you need to make sure your view is in "future dollars" instead of "today's dollars". If you leave it in today's dollars, it unwinds the cola and strips away the 2.5% inflation rate because you're discounting every year to today. Had you not selected adjust to future dollars, the number would actually decrease every year when in the "today's dollars" view because it would discount for inflation every year. The fact that it's flat means it is adjusting for inflation. You need to be looking at the future dollars view however to see the numbers increase annually. Note, there is also a box now for indicating if income is taxable which most annuity and pension it will be.


Note you have to set up income stream and check future dollars box AND be sure to check future dollar options for display to see the inflated amounts.
I re-entered my rental income as a "recurring income" in the type menu (drop down) and selected future dollar option. Did not check the tax box since most of funds are actually depreciation so not taxable.
Results show up under "other income" and are inflated at 2.5% rate which is current Fido assumption for income.
Nwsteve

 

[mathjak107]

I realized that too when playing around. What initially made it confusing was in today's dollars they had expenses rising but discounting inflation in everything else including ss which everyone knows has to be cola adjusted.

Using todays dollars really skews things when they have colas .

 

[tdv2]

Interesting thing happened with my analysis the other day. I had a birthday and turned 52. I have the planning set to live to 94. I have expenses detailed in the expense section worksheet.....included everything I have on my personal worksheet. Since the new tool came out, I was getting ~106 on the retirement preparedness measure scale with ~$800k left over with the under performing market. On my birthday, the numbers jumped to 116 on the RPM and ~$1,600k left over. I'm telling the tool I have one more year to work. I didn't drill in yet to see what is happening....it's strange that it would jump this much with a 40 year planning horizon.

 

[mathjak107]

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