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Can I Afford To Retire?

Reviewing: Fidelity Investments Retirement Income Planner  |  Rating:
eggy By eggy on
Badge: Advisor | Level: 17 | Finances Expertise:
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The Fidelity Income Planner is a comprehensive educational tool to help you analyze the feasibility of meeting your retirement goals.

The data for the process is captured on-line via the Fidelity website (or with the help of a representative in a Fidelity office).

The required inputs consist of information such as age, salary, savings & investments, expected pensions & social security, and information about your spouse. Fairly detailed spending estimates are captured which provide structure to categorize expenses as Essential or Discretionary.

You have the ability to specify two expected inflation rates; one for health care expenses and another for other categories. It is also possible to include expected extraordinary income at points in the future, such as for the expected sale of a house after retirement.

The primary output of the Retirement Income Planning process is an individually tailored report approximately 30 pages long which is called 'Your Retirement Income Plan and Action Steps'. The report is available in pdf format and it can also be mailed. The mailed version is a softbound booklet which is easy to file for later reference.

The model in the report uses Monte Carlo Analysis to provide you with some percentage estimates of the probability of meeting your retirement income goals.

There is an interesting two page schedule which shows your yearly expected assets, spending, taxes, and minimum required distributions from tax deferred account. This section makes the impact of inflation very visible.

Of particular interest to most people is whether the model predicts that you will have enough money to last through your expected lifespan.

I have tried to do similar modeling in a spreadsheet. Finally, I decided that the Retirement Income Planner would be better than anything I could do myself.

The Fidelity Retirement Income Planner is designed primarily for use in the USA. All retirement planning models necessarily use estimates of returns, tax rates, and inflation. Actual results will almost certainly differ from the estimates, but this tool is transparent in its assumptions.

Fidelity has a newer tool "myPlan Retirement Quick Check" which evidently provides similar information but with less effort and detail. This tool is said to be more appropriate for people five or more years from retirement.