Fidelity Retirement Analysis Tool

[WestwardBound]

I currently have my taxable investments at Fidelity in a standard brokerage account. Also, my wife's IRA. These were moved from my prior investment firm where I had a financial advisor paid through AUM. So I am now self-directed with no advisory fees.

Do those accessing eMoney have a paid advisory relationship or is it available to anyone with an account?

I use the retirement planner currently. Wondering if eMoney is more robust for planning purposes such as roth conversions.

 

[Dinker01]

Dinker01,

On page 17 of the FRP document you can save or printout, it addresses how FRP handles taxes:

* - The analysis used an estimated effective tax rate for the federal and state level based on the projected gross taxable income for a given year. To calculate your effective tax rate estimate, we took into account the filing status and state of residence you provided. If no state was provided, the analysis assumed a state
effective tax rate of 5%.

Thanks - I saw that. My question is whether “total expenses” in the results table includes the estimated taxes. I would have expected fidelity to break out the dollar amount of estimated taxes so you could back that out to see your estimated disposable taxes. I ran a couple of scenarios to try and back out the taxes but it still wasn’t clear.

 

[jayanu]

Sounds like you are good to go. Still, I recall that feeling of... well, what if? 16 years later, I spend way more than I thought and my port is still growing. It's all good. Sometimes you have to just say "What the heck!" and do it.

And if you are taking RMD then RMD in 16 years is getting huge too!

 

[jayanu]

I currently have my taxable investments at Fidelity in a standard brokerage account. Also, my wife's IRA. These were moved from my prior investment firm where I had a financial advisor paid through AUM. So I am now self-directed with no advisory fees.

Do those accessing eMoney have a paid advisory relationship or is it available to anyone with an account?

I use the retirement planner currently. Wondering if eMoney is more robust for planning purposes such as roth conversions.

If you have a Fidelity account even with $0.00, eMoney can be done by FIdelity. I had it done for a friend of mine who has been with Morgan Stanley for 30 + years and they never offered anything of that sort so I had him open a Fidelity account and do the eMoney. Oh, MS found out and did a similar Monte Carlo for him and gave him an Amex Platinum card free ($550/year) to keep his $13 million accounts!

Again if you do not have a Fidelity rep then call my rep Rob Sim at
(732) 842-6700 ext 58573 • Work
1-800-753-0602 • Work
RobSim.team@fidelity.com

 

[G-Man]

130 is still a great score, but should probably include some lumpy expenses.

As mentioned previously, the "Significantly below average market" module is a bit of a misnomer, as it provides effectively a 90% success rate, which is probably similar to a 95% success rate in Firecalc due to in theory Monte Carlo simulations will produce a more conservative result, but not just because of the module mentioned above.

If you think about the Firecalc module, the 95% success rate is producing 6 failures in history and thus is taking into account conditions which are significantly below average.
The difference with the 2 programs is that Fidelity can/will take results from for example year 2000, followed by year 1929, followed by year 1966.
This scenario has never happened to this level historically and thus a Monte Carlo module will end up with more conservative results than an Firecalc historical module, even though Firecalc does take into account the worst investment years, but in a historical sequencing module, not a random sampling searching for the worst years.

I thought any score over a 100 is in the green.

 

[Dtail]

I thought any score over a 100 is in the green.

My point is a different point.
If your expenses are 50k and your score is 100, then the maximum spending is 50k.
However the success rate under the aforementioned module translates to a 90% confidence level, meaning that 90 times out of 100 times, you would not run out of money at the end of your retirement.

Conceptually, Fidelity doesn't have a module which translates to a 100% success rate.

 

[G-Man]

My point is a different point.
If your expenses are 50k and your score is 100, then the maximum spending is 50k.
However the success rate under the aforementioned module translates to a 90% confidence level, meaning that 90 times out of 100 times, you would not run out of money at the end of your retirement.

Conceptually, Fidelity doesn't have a module which translates to a 100% success rate.

Ok. So if your expenses are $50k and your score is 120, then the maximum spending is $60K.

 

[Dtail]

Ok. So if your expenses are $50k and your score is 120, then the maximum spending is $60K.

That is correct. So that translates to that one can have a 90% confidence level that they will not run out of money with spending being at the 60k level in your example.
Thus effectively there isn't a 100% confidence level in the Fidelity modules, unlike other retirement calculators.
However due to the somewhat conservative nature of their Monte Carlo calculations, the 90% level can translate to a higher confidence level on historical sequencing based calculators.

 

[G-Man]

That is correct. So that translates to that one can have a 90% confidence level that they will not run out of money with spending being at the 60k level in your example.
Thus effectively there isn't a 100% confidence level in the Fidelity modules, unlike other retirement calculators.
However due to the somewhat conservative nature of their Monte Carlo calculations, the 90% level can translate to a higher confidence level on historical sequencing based calculators.

Thank you so much for contributing to this thread. I have learned a lot.

 

[G-Man]

130 is still a great score, but should probably include some lumpy expenses.

As mentioned previously, the "Significantly below average market" module is a bit of a misnomer, as it provides effectively a 90% success rate, which is probably similar to a 95% success rate in Firecalc due to in theory Monte Carlo simulations will produce a more conservative result, but not just because of the module mentioned above.

If you think about the Firecalc module, the 95% success rate is producing 6 failures in history and thus is taking into account conditions which are significantly below average.
The difference with the 2 programs is that Fidelity can/will take results from for example year 2000, followed by year 1929, followed by year 1966.
This scenario has never happened to this level historically and thus a Monte Carlo module will end up with more conservative results than an Firecalc historical module, even though Firecalc does take into account the worst investment years, but in a historical sequencing module, not a random sampling searching for the worst years.

In the Fidelity tool when I look at the data in the table view, I noticed that the first 3 years, my portfolio is reduced a lot. I assume that relates to your comment around "Fidelity can/will take results from for example year 2000, followed by year 1929, followed by year 1966.".

Please confirm.

 

[Dtail]

In the Fidelity tool when I look at the data in the table view, I noticed that the first 3 years, my portfolio is reduced a lot. I assume that relates to your comment around "Fidelity can/will take results from for example year 2000, followed by year 1929, followed by year 1966.".

Please confirm.

Actually I am not sure that is the specific reason.
I believe that Fidelity takes around a 10 to 15% haircut the first year of the portfolio as part of the conservative calculations built in, but have not really looked into the exact reason why.

 

[G-Man]

Actually I am not sure that is the specific reason.
I believe that Fidelity takes around a 10 to 15% haircut the first year of the portfolio as part of the conservative calculations built in, but have not really looked into the exact reason why.

So the Fidelity tool takes a 10-15% haircut the first year and also takes in consideration those worst 3 years as well in the model. That is very conservative. My score is in the green and I feel much better now about the ability to retire if I choose to.

 

[Dtail]

So the Fidelity tool takes a 10-15% haircut the first year and also takes in consideration those worst 3 years as well in the model. That is very conservative. My score is in the green and I feel much better now about the ability to retire if I choose to.

Well not sure quite that statement, but yes generically speaking.
Firecalc also takes these years into their calculation, just not in a row.

 

[RetiriusMinimus]

Welcome! Having seen your other thread on this, we hit 150, too, because I first assumed we would retire on a strict budget. Then I started figuring out how to add ACA insurance expenses from retirement to age 65, and added budget items for dining out and traveling, and now our score is "only" 130. But that doesn't really include lumpy expenses, like big home improvement projects, appliance upgrades, etc.

As for Fido's assumptions, I'm sure you noticed that the default is "Significantly below average market conditions". I'm pretty comfortable with that, as I do want to plan for the worst (and hope for the best)! But in FIRECalc, note that on the Spending Models tab there is an option for "Percentage of remaining portfolio", which allows you to cut back on your spending during a downturn. Many of us plan on keeping enough bonds or cash for at least 2-3 years of expenses for just such an occasion, but we would probably also cut back on discretionary spending, especially early in retirement.

@the cosmic avenger..yeah I put some expenses for major stuff, really guesses at this point. 130 is a great score. Life brings many changes that can even make a 150 not enough. Totally agree having 2-3 years of safe, liquid coin is good. Really though the expense side is the challenge…

 

[GravitySucks]

So the Fidelity tool takes a 10-15% haircut the first year and also takes in consideration those worst 3 years as well in the model. That is very conservative. My score is in the green and I feel much better now about the ability to retire if I choose to.

Not positive, but pretty sure those 3 years being the first or early years in a row would be in the run in the 10% that fail.

 

[G-Man]

Can someone explain how they are entering the Medicare premium expense in the Fidelity tool starting at age 65. I have not included that expense in tool yet. I will estimate around $400 per month for my wife and I. Does that seem reasonable?

 

[RetiredHappy]

Can someone explain how they are entering the Medicare premium expense in the Fidelity tool starting at age 65. I have not included that expense in tool yet. I will estimate around $400 per month for my wife and I. Does that seem reasonable?

It depends on whether you are buying a Medicare Supplement / Medigap plan or not. The base Medicare cost is $148.50 per person this year. If you buy a Supplement plus Drug D, the costs vary depending on which company you buy from. In my husband's case (early 70s), he is paying $317 for the Plan F and $63 for Plan F, which brings it up to $380. If we buy the plan at 65, I think it can be as low as about $170 plus drug plan $63. We would choose the expensive drug plan because of lower drug costs which he is on. I am not on Medicare yet.

The Math would be: $148.50x2, $170x2, $63x2. $763 if we both turn 65 now.

If you make too much money, there is IRMAA penalty. We are in tier 2 this year and tier 3 next year. Instead of $148.50, tier 2 is $207.90 (income $176,001 to $222,000) and tier 3 is $297 ($222,001 to $276,000).

Oh, and don't forget the cost of drugs. Our drugs cost about $1500 a year for each of us.

 

[qwerty3656]

I've run the analysis several times, but I don't see the score you guys are talking about (e.g. 150)? Where would I find that?

 

[38Chevy454]

I've run the analysis several times, but I don't see the score you guys are talking about (e.g. 150)? Where would I find that?

It only gives a score if you put a retirement date in the future. If you are already retired, it does not give a score.

 

[wmc1000]

I've run the analysis several times, but I don't see the score you guys are talking about (e.g. 150)? Where would I find that?

Have you marked that you are still working? If not, make sure that is checked use 2022 for your retirement year and input a $1 salary.

 

[qwerty3656]

Have you marked that you are still working? If not, make sure that is checked use 2022 for your retirement year and input a $1 salary.

Thanks - that worked - kind of annoying. I had to put a $1 of income for both me and my wife even though she hasn't worked since we had kids.

 

[The Cosmic Avenger]

Can someone explain how they are entering the Medicare premium expense in the Fidelity tool starting at age 65. I have not included that expense in tool yet. I will estimate around $400 per month for my wife and I. Does that seem reasonable?

Seems reasonable, I used $300/mo. myself, but close enough. You found where to put in year-specific expenses, right? If you click "Edit details" on the Medical Insurance line, you can enter start and end years. I entered the year we turn 65 and the year we turn 95, as that's last year I told the planner to estimate overall. I also put $1,700/mo. for the years between the time we expect to retire and when we turn 65, as that's the estimate I got from Health Sherpa.

 

[wmc1000]

Thanks - that worked - kind of annoying. I had to put a $1 of income for both me and my wife even though she hasn't worked since we had kids.

Yes it is, I just keep rolling it ahead each year even though we have been retired for 5 years!

 

[Dtail]

Yes it is, I just keep rolling it ahead each year even though we have been retired for 5 years!

Same here. I asked them to allow a score while already retired, but no go.

 

[G-Man]

I have a question on the Taxes section.

I have only enter my data into the Retirement Analysis tool. We always file "Married Filing Jointly". Since I only have my information entered, should I select "Married Filing Separately"? They is a difference in the score and assets at the end of plan based on the filing status.