Fidelity Retirement Analysis Tool

[G-Man]

My Fidelity Wealth Management Advisor introduced the Fidelity Retirement Analysis tool to me during a retirement planning session last week. Based on the numbers inputted (income & expenses, etc.), at the end of the plan, I still have money left over using the significantly below average market. I even estimated my discretionary expenses (inputted in the Detailed Expenses section) on the high side.

The Fidelity advisor gave me the thumbs up that I can retire today. I'm very cautious and want to be sure about the decision to retire.

For those that have used the tool, how accurate is it? Can you trust the analysis that is given by the tool?

Thanks

 

[braumeister]

Back when it was still called the RIP (dumbest name ever), my Fidelity guy walked me through it and showed me some tricks with it that I hadn't figured out on my own. But the bottom line was the same; I was fine.

FIRECalc is still my favorite calculator, but between that, FIDO's tool, and I-ORP, as long as you read the instructions for each of them and use them as intended you really can rely on the results you get.

 

[chassis]

My Fidelity Wealth Management Advisor introduced the Fidelity Retirement Analysis tool to me during a retirement planning session last week. Based on the numbers inputted (income & expenses, etc.), at the end of the plan, I still have money left over using the significantly below average market. I even estimated my discretionary expenses (inputted in the Detailed Expenses section) on the high side.

The Fidelity advisor gave me the thumbs up that I can retire today. I'm very cautious and want to be sure about the decision to retire.

For those that have used the tool, how accurate is it? Can you trust the analysis that is given by the tool?

Thanks

I have used it. It is grossly conservative. If the Fidelity tool gives you a thumbs up, you are good to go.

 

[FREE866]

I have used it. It is grossly conservative. If the Fidelity tool gives you a thumbs up, you are good to go.

Yeah, I thought the same thing about Fidelity. FIRECALC on the other hand seems really too optimistic, but I guess using history the numbers are what they are !

 

[RetiredHappy]

I have used the Fidelity retirement planning tool for the last 15 years and it has always said we are doing just fine. We just became Fidelity clients again and pulled out the old data and updated with current data. It still tells me that we are in great shape in a significantly below average market. I do really like the breakdown of expenses as it makes me think through more thoroughly.

 

[G-Man]

Are there any special gotchas as it relates to inputting your data into the Fidelity tool?

For example for "Retirement Expenses", I using the "Detailed Expenses" worksheet. I entered data into the Housing and Health Care & Insurance buckets. These are considered Essential expenses. I create a Custom Expense bucket called "Discretionary" and entered a lump sum for all my other monthly expenses.

Just trying to make sure I enter the data correctly in the tool so it gets me the correct analysis.

 

[scrabbler1]

Back in early 2008, when I was planning my ER, I went to my local Fido and met with my Account Executive to get an outside opinion about my ER plan. I wasn't yet a member of this forum, and I had never heard of FIREcalc. I printed out my budget and my non-Fido assets and brought it all to the meeting. She input my data into the RIP program (yes, it has a morbid name LOL) and gave me an enthusiastic thumbs-up for my ER.

Since 2008, and with different AEs, we have updated my RIP data but each time it shows just what I expect it to show: I am fine prior to age ~65, then, when my "reinforcements begin arriving, my ending portfolio value explodes.

One minor complaint about the program is that I can't vary the federal income tax rate to better suit my personal situation (the program assumes some tax rate based on who-knows-what). Furthermore, I can't vary my state income tax rate if I happen to want a tax rate lower than the federal one. (If I want a higher rate, I can assign it to the Local Tax rate).

 

[G-Man]

So it looks like folks trust the Fidelity tool.

Once again, are there any special considerations when inputting your data into the tool?

 

[RetiredHappy]

Are there any special gotchas as it relates to inputting your data into the Fidelity tool?

For example for "Retirement Expenses", I using the "Detailed Expenses" worksheet. I entered data into the Housing and Health Care & Insurance buckets. These are considered Essential expenses. I create a Custom Expense bucket called "Discretionary" and entered a lump sum for all my other monthly expenses.

Just trying to make sure I enter the data correctly in the tool so it gets me the correct analysis.

The most interesting part about the tool is the "Retirement Expenses". I don't remember how I first created it years ago. Right now, my Discretionary items are Recreation, Entertainment, Charitable Donations and Gifts. You can just play with it and adjust etc.

Update: I went back to look. There is a box on the right each line item. If you check it, it will turn the line item to essential.

 

[MRG]

So it looks like folks trust the Fidelity tool.

Once again, are there any special considerations when inputting your data into the tool?

Not really any special considerations. As I remember the inputs were really for me, enter my breakdown of expenses. Once entered it's just simulation. I ran every planner I could find RIP, a great name if you were the developer, was by far the most conservative.

 

[CRLLS]

I also use the Fidelity too along with of course I-Orp and Firecalc. I trust them all, especially when they all say I'm good.

As for any special considerations on inputs, Garbage In = Garbage Out. I don't think it will tell you if you if you missed something major like groceries or medical premiums. It is up to you to ensure accuracy and completeness. Maybe you are looking for a tool that compares your itemized costs with the median of all users?

 

[travelover]

The output is as accurate as the input. My problem is that I don't know what the market will do, what inflation rate will be or how long I'll live. Fifteen years into retirement I've quit worrying about it.

 

[chassis]

I just ran the Fidelity tool. To me it's overly simplistic, and overly conservative. I prefer the RPM spreadsheet, portfoliovisualizer "Financial Goals" example and my own homebrew spreadsheet.

@G-Man what is your initial withdrawal rate at start of retirement?

 

[G-Man]

I just ran the Fidelity tool. To me it's overly simplistic, and overly conservative. I prefer the RPM spreadsheet, portfoliovisualizer "Financial Goals" example and my own homebrew spreadsheet.

@G-Man what is your initial withdrawal rate at start of retirement?

8.09%. It gets significantly lower when pension kicks in at 60, SS at 62, mortgage ends, and Medicare at 65.

 

[RetireBy90]

I have used it and found it came up with similar results to other tools. I added fluff to expenses with all the tools to give Rome extra confidence. We have an advisor at fidelity who walks through the inputs each time we meet her.you may find it helpful if you can get an appointment. I always appreciate a 2nd, 3rd or 4th opinion.

 

[G-Man]

I have used it and found it came up with similar results to other tools. I added fluff to expenses with all the tools to give Rome extra confidence. We have an advisor at fidelity who walks through the inputs each time we meet her.you may find it helpful if you can get an appointment. I always appreciate a 2nd, 3rd or 4th opinion.

Same here. I added some fluff to the discretionary expense buckets.

 

[RetiredHappy]

I don't understand the complaint about the Fidelity tool being overly conservative. I would much rather have the calculator be overly conservative than the FireCalc tool that tells me that I may have up to 80 Million dollars at my end of life, all entered with the same data.

 

[FREE866]

I don't understand the complaint about the Fidelity tool being overly conservative. I would much rather have the calculatorbe overly conservative than the FireCalc tool that tells me that I may have up to 80 Million dollars at my end of life, all entered with the same data.

I know right?!



That is the beauty of compounding though. if you have 7 figures now, don't spend a lot and have 35+ years with a heavy stock allocation history tells us your portfolio will skyrocket over a few decades!

 

[chassis]

I don't understand the complaint about the Fidelity tool being overly conservative. I would much rather have the calculatorbe overly conservative than the FireCalc tool that tells me that I may have up to 80 Million dollars at my end of life, all entered with the same data.

Overly conservative may drive a person to work longer than necessary, or to spend below what is a sustainable withdrawal rate. Both scenarios, working longer than necessary, or spending lower than allowable, may represent a lower quality of life/standard of living than the person had hoped for. All because of an overly conservative model, assuming the hypothetical person in question didn't understand the underlying workings of Fidelity's model.

An overly conservative model will fill the graveyard up with the richest people in all of history.

 

[chassis]

8.09%. It gets significantly lower when pension kicks in at 60, SS at 62, mortgage ends, and Medicare at 65.

@G-Man I like your initial WD rate. I'm surprised the Fidelity tool gave a thumbs up to a scenario with that initial WD rate.

 

[G-Man]

@G-Man I like your initial WD rate. I'm surprised the Fidelity tool gave a thumbs up to a scenario with that initial WD rate.

Please explain. You have me worried now.

 

[RetiredHappy]

Please explain. You have me worried now.

Don't worry. I don't know if chassis knows that you can enter expenses by start and end year. If that is how you have done, and Fidelity tool says you are fine, then you should have no worries. Hence I really like the Fidelity tool. It is very easy to use and allows you to put in precise years and amounts.

I noticed that in the significantly below average, it starts 2022 with about 15% below my current net worth. I am ok with that.

 

[RetiredHappy]

Overly conservative may drive a person to work longer than necessary, or to spend below what is a sustainable withdrawal rate. Both scenarios, working longer than necessary, or spending lower than allowable, may represent a lower quality of life/standard of living than the person had hoped for. All because of an overly conservative model, assuming the hypothetical person in question didn't understand the underlying workings of Fidelity's model.

An overly conservative model will fill the graveyard up with the richest people in all of history.

First of all, I don't consider Fidelity tool "overly conservative" even with their "significantly below average" returns. Secondly, I have used it before we retired and it did not "make" me work longer than necessary. I really like the tool because I feel that I can rely on the numbers. Frankly, I don't trust FireCalc numbers because they look ridiculously high/optimistic.

I posted elsewhere before, our number is $200K a year including taxes. When I updated the Fidelity tool with current numbers, I was able to do alot of what-ifs and realize that we really should not go beyond $200K a year because I want us to leave a good amount to my son. In other words, while we have not had a reduction in standard of living from when we were working, we should not go off and buy a Bentley for my husband.

 

[G-Man]

Don't worry. I don't know if chassis knows that you can enter expenses by start and end year. If that is how you have done, and Fidelity tool says you are fine, then you should have no worries.

I noticed that in the significantly below average, it starts 2022 with about 15% below my current net worth. I am ok with that.

Yes.. That is how I did it.

 

[Dtail]

Yes.. That is how I did it.

I use the Fidelity retirement tool on a regular basis, even though retired. I like numbers and all that.
A few thoughts.
*You should only use the Significantly Below Average module.

*The score you receive on Fidelity relates to the percentage of expenses one can spend. So if your budget is 100k and your score is 110, then you can theoretically spend 110k and be safe.

*A score of 100 in the Significantly Below Average module means that you should be good 90% of the time. The success rate effectively is not above 90%, while in Firecalc it can be 100%. However Fidelity is more conservative than Firecalc and in the end you are in the same ballpark.

*Fidelity's calculator uses a Monte Carlo simulator vs. an Historical Sequencing concept in Firecalc. Thus the "fat tails" are more pronounced in the Fidelity calculator. There are more results which are extreme. As an example, the loss year of 1929 can be followed by the loss years of 2000 and 2008. Thus you start your retirement with 3 huge loss years, which historically speaking hasn't happened, with the concept of reversion to the mean.

* The medical expense inflation rate is IIRC 4.9%. All other inflation rates are at 2.5%

* Renting vs. a mortgage expense will yield different results.

* Fidelity calculates the taxes for you.

* The program takes a decent haircut in your first year of retirement.

That's about it for now.