Fido Retirement Planning Tools

[Huston55]

I’m typically disappointed by generic ‘one size fits all’ financial planning tools, and the first webpage of a recent “Fidelity Viewpoints” article on ‘How much do I need to retire?’ was no exception...I thought. It gives a Rule of Thumb: save 10x annual income by age 67 to retire successfully at that age. Great, thanks; not helpful at all!

However, after reading the details in the various links and a bit of using the tools, I have a more positive impression of them. Admittedly, the tools are somewhat basic & fit better for more normal age retirement (62-70 yo) but, the overall ‘Retirement Roadmap’ provides a well structured approach to key questions, with research based, easy to use tools to get one to the right place. For example:

- How much to save? (based on beginning age)
- How much will I need? (based on retirement age)
- What expenses will my savings cover?
- How much can I withdraw each year w/o running out of money?

For each of these questions, there are multiple interactive tools to help you analyze your own situation and/or multiple scenarios. Some key take always for me were:

- Their rule of thumb for how much to save is based on a 45% income replacement factor, with the remainder coming from SS (assumes no pension). This is lower than my goal was or than I’m comfortable with but, it’s probably applicable to a large percentage of retirees.

- Their model is based on steady income growth (1.5%/yr real). So, if your total compensation increased dramatically in the later portion of your career, this rule of thumb doesn’t work well.

- If you’re in their recommended ranges & want a very high probability of portfolio survival, a more conservative AA (20-50% equities) is better than a more aggressive AA. (Note: this is based on Fido’s RIP tool, which I think is one of the best out there.)

- There are also some useful links to subjects like 401k rollover pros/cons, how to manage NUAs, etc.

- Their “See How You’re Doing” tool tells me we can spend a lot more than we currently do; with the most spending possible from a more conservative AA. (Guess I gotta call up RobbieB and get lessons on how to “Blow that Dough!”)

What do you think of Fidelity’s retirement planning tools? How do they compare to the tools on other brokerage sites?

https://www.fidelity.com/viewpoints/retirement/how-much-money-do-i-need-to-retire

ETA: I’m a big fan of Fido’s RIP tool but, this post & link are more about the other retirement planning tools available on the Fidelity website.

 

[Dtail]

I think the Fidelity Retirement calculator is excellent. It is Monte Carlo based which can be used in conjunction with historical based calculators like Firecalc.
It is typically one of the most conservative calculators. You can input individual expenses and add/subtract future variable expenses, etc.
In the future they will implement more sophisticated what if scenarios.

 

[COcheesehead]

I think the Fidelity Retirement calculator is excellent. It is Monte Carlo based which can be used in conjunction with historical based calculators like Firecalc.
It is typically one of the most conservative calculators. You can input individual expenses and add/subtract future variable expenses, etc.
In the future they will implement more sophisticated what if scenarios.

+1

There are a lot of overly simplistic calculators out there. Fido's is probably the best I have used. The detailed budget feature is key.

 

[GravitySucks]

Their retirement planning tool is my favorite. Even though it tells me I'll have less at 92 than some other tools did.

 

[volfan]

Do you have to be a Fidelity customer to use this calculator?

 

[Huston55]

Do you have to be a Fidelity customer to use this calculator?

You can sign in as a guest & use the tool but, I don’t know if it will retain your data.

 

[COcheesehead]

You can sign in as a guest & use the tool but, I don’t know if it will retain your data.

Its only as good as the data so if you are not a customer, I think you'll have to fill out an investment profile and then input all financial data from your non Fido accounts.

 

[TwoByFour]

- If you’re in their recommended ranges & want a very high probability of portfolio survival, a more conservative AA (20-50% equities) is better than a more aggressive AA. (Note: this is based on Fido’s RIP tool, which I think is one of the best out there.)

That finding seems at odds with the Trinity study (and Bengen). Trinity found that the optimum AA for a 4% or 5% withdrawal rate (inflation adjusted) for a retirement period of 20, 25, or 30 years is 75% equities. With low withdrawal rates (3% or less) it matters less. The problem is that bonds are horrible in a long-term inflationary environment.

 

[ncbill]

That finding seems at odds with the Trinity study (and Bengen). Trinity found that the optimum AA for a 4% or 5% withdrawal rate (inflation adjusted) for a retirement period of 20, 25, or 30 years is 75% equities. With low withdrawal rates (3% or less) it matters less. The problem is that bonds are horrible in a long-term inflationary environment.

I would worry about sequence of return risk starting retirement with 75% equities starting out in retirement.

Which is why I personally would follow a rising equity glide path, starting around 30% equities.

And I love Fidelity's retirement planner - I've found it one of if not the most conservative of calculators.

 

[COcheesehead]

That finding seems at odds with the Trinity study (and Bengen). Trinity found that the optimum AA for a 4% or 5% withdrawal rate (inflation adjusted) for a retirement period of 20, 25, or 30 years is 75% equities. With low withdrawal rates (3% or less) it matters less. The problem is that bonds are horrible in a long-term inflationary environment.

You can't make a blanket statement about AA and withdrawal rates using the Fido tool. If I look at the detailed report of my withdrawal percentages its all over the board from 0% to over 4% in later years. It depends on other income like from RE or SS. It does not calculate a flat withdrawal percentage, but works on inflation adjusted expenses and income that you input and how your AA meets those needs over time.

 

[Huston55]

That finding seems at odds with the Trinity study (and Bengen). Trinity found that the optimum AA for a 4% or 5% withdrawal rate (inflation adjusted) for a retirement period of 20, 25, or 30 years is 75% equities. With low withdrawal rates (3% or less) it matters less. The problem is that bonds are horrible in a long-term inflationary environment.

Yep, I had the same initial reaction. But, I think there are a couple of things at play here.

1. The Trinity study has been updated with quite a bit of research (Bengen, Pfau, etc.) which would support lower equity allocations in FIRE.
2. Sequence of returns risk actually does argue for a lower equity allocation.

Taken together, I think these (plus perhaps other factors I may not have considered) make the Fido tools accurate. Here are some links for further study/thought.

First Figure: Fido table is for only 25 yrs & illustrates better sustainable w/d rates for lower equity allocations if one wants very high certainty of outcome.

Second Figure: Pfau chart (with updated market data through 2008) illustrating that 30% equity allocation is as good as 70% equity allocation; and we know a lower equity allocation would be less volatile.

Lastly, the BH Wiki on Trinity ( https://www.bogleheads.org/wiki/Trinity_study_update ) notes the same thing regarding lower equity allocations.

“These points aside, generally speaking, the studies mentioned above together tend to suggest that stock allocations anywhere between 20% and 80% will keep retirees within their area where maximum sustainable withdrawal rates will be at their highest.”