Financial Sustainability Index (FSI)

[Ready]

For those of you who use Personal Capital, they have invented a new term in the past few months - the Financial Sustainability Index. It appears to be their interpretation of a SWR. My FSI is recalculated daily. At the moment it suggests that I can spend 3.8% of my net worth based on my age.

If I increase my age from 47 to 67, it increases my SWR to 6.68%. It does not ask me how long I expect to live, so perhaps it has defaults. It allows me to adjust when I plan to take social security, my risk tolerance, and a few other variables.

There are some notes you can click through to that provide a bit more detail on what an FSI index is, but even after reading them I don't find it to be all that obvious what they are calculating, or what the purpose of the index is.

Has anyone else looked at this?

 

[braumeister]

Sounds like you can play with their tool. Just for grins, it might be interesting to change your age to 25 and see what it says.

 

[nash031]

For those of you who use Personal Capital, they have invented a new term in the past few months - the Financial Sustainability Index. It appears to be their interpretation of a SWR. My FSI is recalculated daily. At the moment it suggests that I can spend 3.8% of my net worth based on my age.

If I increase my age from 47 to 67, it increases my SWR to 6.68%. It does not ask me how long I expect to live, so perhaps it has defaults. It allows me to adjust when I plan to take social security, my risk tolerance, and a few other variables.

There are some notes you can click through to that provide a bit more detail on what an FSI index is, but even after reading them I don't find it to be all that obvious what they are calculating, or what the purpose of the index is.

Has anyone else looked at this?

A little bit, but I don't think you can really interpret it as a SWRate. It's more of a SWAmount per Month. They have some assumptions based on your asset allocation and expected return, age, etc. Mine seems about right for my portfolio size if you assume it's a Safe Withdrawal Amount.

That said, I'm not hanging my hat on it in any way since it is clearly an incomplete picture of financial independence (i.e. does not account for SS, pension, etc.)... but it's kinda neat.

 

[NanoSour]

I can't find it on the site. Where is the FSI hiding?

 

[David1961]

I can't find it on the site. Where is the FSI hiding?

+1. I'm wondering the same thing.

 

[Ready]

Assuming you are logging in through a desktop and not a mobile app, it should appear on the top left corner of the main dashboard. On an iPad, I was able to find it by clicking through to accounts.

Here is a paragraph from the web site explaining what it is:

The Financial Sustainability Index (FSI) is a personalized index that reveals your current financial reality, without relying on any assumptions or projections. Given your net worth and current market prices, the FSI measures the monthly income you can receive every month for the rest of your life starting today. This monthly payment will adjust with inflation to preserve your purchasing power and will not be affected by market fluctuations.

 

[NanoSour]

Nope, not on my PC dashboard. I'm using the desktop version on a Mac. I would doubt that would be the difference. Maybe it's b/c I don't use their management services.

 

[Ready]

I'm not sure. I'm on a Mac as well, and I don't use their advisory services either.

 

[Hopeful]

I don't use their management services, and it shows up on my home screen. Also in the app. In fact they sent me an email about it too a couple weeks ago. Their numbers seem pretty generous though, not what I would be comfortable using.

 

[Hopeful]

Funny thing was, this week I logged into personal capital and my net worth had increased by more than a million. I rubbed my eyes, and then realized a couple of my retirement accounts had somehow been duplicated. Not really sure how that happened. Oh well, easy come easy go.

 

[nash031]

The Financial Sustainability Index (FSI) is a personalized index that reveals your current financial reality, without relying on any assumptions or projections. Given your net worth and current market prices, the FSI measures the monthly income you can receive every month for the rest of your life starting today. This monthly payment will adjust with inflation to preserve your purchasing power and will not be affected by market fluctuations.

Seems like an awfully big assumption to me...

Thanks for posting: I was wrong in assuming it accounted for return based on your asset allocation.

What it DOES is use your NET WORTH, which includes home equity. This makes my SWR based on my FSI ~2.1%. In my invested assets, it's more like 4.5%. Either way, the FSI calculation is of limited value since it doesn't reflect reality in any way, despite their definition of it.

 

[Ready]

The part I like is the graph showing your prior six month expenses. There is a bar showing the six month average, and another bar showing the SWR they have calculated. The bigger the spread between the two bars, the more cushion you theoretically have. The data is constantly being updated as your expenses change and your net worth changes, so it's interesting to peak at it from time to time and see if the two lines are moving closer together or (hopefully) further apart.

I wouldn't make any life altering decisions with this data, but it's fun to play around with it.