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Old 04-16-2016, 07:36 AM
 
Location: Central Massachusetts
4,800 posts, read 4,845,678 times
Reputation: 6378

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We talk often about retirement planning and everyone has a favorite tool or calculator that has for the most part given them what they think is their best plan or plan outcome. Some come from the internet as free and unbound. While others are ones their investment companies provide. They all are used to help determine if you are on the right path and if you need to make adjustments.

I found this article that asks the question are these tools doing more harm than good? It has a few interesting points and the piece is relatively short. You all can read it for yourselves but I wonder how people would react if there were no planning tools free or otherwise. Would we just use our financial calculators that we bought our kids for school? You know the ones. The ones that have amortizations and interest calculations.

Anyway for those that are wondering here is a small quote from the article.

Quote:

Is bad retirement advice better than none?

There is no question that all of the variables listed above can have an important impact on retirement planning. However, the sheer number of variables raises the question of whether it is possible to make an accurate projection of retirement needs and funding adequacy.

After all, doing so would require not just a retirement planning tool detailed enough to comprise all those variables, but it would also require remarkable insight in order to get the inputs for those variables right.

That complexity supports the paper's position that relying on a single answer from any financial planning tool is dangerous - usually, when you expect a simple answer to a complex problem, you will be disappointed.



Do retirement planning tools do more harm than good?
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Old 04-16-2016, 07:37 AM
 
71,515 posts, read 71,694,121 times
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depends which ones . some are nothing more then reverse amortization calculators and can be way off base .

the better ones are based on the most horrible outcomes which have so bad they happened once in 146 years .

once those numbers are quantified you have a benchmark where mathematically you know what you need to survive .

so using the calculators like firecalc or fidelity's planner are like building a house to with stand the strongest storms ever , for us it would be sandy . it does not mean we can't ever get blown away but at least you know to date we have never seen anything stronger then sandy so odds are as good as they get facing the unknown

Last edited by mathjak107; 04-16-2016 at 08:43 AM..
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Old 04-16-2016, 08:26 AM
 
3,714 posts, read 3,120,389 times
Reputation: 7866
Quote:
Originally Posted by golfingduo View Post
We talk often about retirement planning and everyone has a favorite tool or calculator that has for the most part given them what they think is their best plan or plan outcome. Some come from the internet as free and unbound. While others are ones their investment companies provide. They all are used to help determine if you are on the right path and if you need to make adjustments.

I found this article that asks the question are these tools doing more harm than good? It has a few interesting points and the piece is relatively short. You all can read it for yourselves but I wonder how people would react if there were no planning tools free or otherwise. Would we just use our financial calculators that we bought our kids for school? You know the ones. The ones that have amortizations and interest calculations.

Anyway for those that are wondering here is a small quote from the article.

Do retirement planning tools do more harm than good?
Excellent subject. I think it's safe to say, for most, regardless the tool/intuition or whatever one uses to project retirement scenarios, the future will be more expensive than planned.
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Old 04-16-2016, 08:29 AM
 
6,241 posts, read 4,725,740 times
Reputation: 12780
The author had a nice catchy title to the article but otherwise had nothing of value to say.
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Old 04-16-2016, 08:38 AM
 
Location: Colorado Springs
4,834 posts, read 4,949,965 times
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A common theme to all those tools: You should have saved more.

Therefore, continue working, adding to your savings and leave the balance with our firm so we can benefit from the fees.

Work until the day you drop.

Then have your estate pay more fees to a law firm to distribute the remains of your estate to your heirs.
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Old 04-16-2016, 08:45 AM
 
71,515 posts, read 71,694,121 times
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the problem is not the information the calculators give you but the fact that folks have no clue what that data represents or how to use it . the data has zero to do with keeping the money with our firm as you stated .

it is strictly based on math and odds . what you do with it and how you interpret it is up to you ..

the numbers do not include any human spending patterns and for good reason , we are all different so it is just simple match based on either actual historical data or monte carlo data based on the same time frames , only they try to improve the odds by finding even greater poor scenario's and protect against the math that caused them .
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Old 04-16-2016, 08:53 AM
 
Location: The Berk in Denver, CO USA
14,023 posts, read 20,336,588 times
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The very shallow article referenced:
The Efficacy of Publicly-Available Retirement Planning Tools
The Efficacy of Publicly-Available Retirement Planning Tools
33 pages of reading fun.
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Old 04-16-2016, 08:54 AM
 
Location: SoCal
13,218 posts, read 6,320,879 times
Reputation: 9827
I never trust these tools. But I run to have an idea. I know my brother ran one of these tools, but he forgot to tell me he put in 6-7% investment return. I never do, I put in 2%. I rather be conservative.
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Old 04-16-2016, 08:59 AM
 
71,515 posts, read 71,694,121 times
Reputation: 49088
if you are entering a predicted return , run from that calculator , the information and protection will be wrong or non existant .

good calculators do not use a fixed return . nor do they assume any particular return . that makes no sense when spending down as sequence risk is the dominating factor .

the same return but different sequences's of gains and losses vary's by 15 years of money.

if you were building a house it would be like you building to construction standards based on average wind speed over decades .

that has no bearing on how you have to build to sustain the highest wind speeds your area already sustained .every hurricane already may be above that average .
it would be very risky building for average wind speeds .

see the difference ?

Last edited by mathjak107; 04-16-2016 at 09:12 AM..
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Old 04-16-2016, 09:00 AM
 
Location: WA
5,394 posts, read 21,390,738 times
Reputation: 5889
Regardless of the quality of planning tools the fact remains that the majority of Americans need to recognize:

- There is a need for a plan long before retirement age.
- Basic math will point out the scale of resources required to live 15+ years.

I find just getting people to recognize the need to budget for the future is the biggest issue.
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