The tools I rely on for retirement planning

Retirement
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I am going to retire in 2025. Here are my picks for free retirement planning tools. Yes, free.

Flexible Retirement Planner - It’s free to individuals, but I donate a few Dollars to the author every year anyway

Fidelity Investments retirement planner - Sadly, in 2024, they decimated the reporting capabilities of this tool, though the underlying math and retirement scoring stays the same. What you have to do now is build your own report document by cutting and pasting data and images from the tool. Free for customers.

FIRECALC - A funky 1990s - Y2K web interface, but it’s pretty powerful. I also donate a few Dollars per year when I use it, but it’s free otherwise.

They all roughly agree with each other, if I am careful to set them all up with the same input data. I run them all in parallel, and go with the most cautious forecast.

Retirement planners that used to be good but got UN-improved - Schwab and Fidelity used to have equally powerful retirement planners, but Fidelity removed the reporting and Schwab just fell over. My gosh, it’s terrible compared to what it was like before.

I used to hang out on Reddit before I got perma-banned by their robot, and on r/retirement people would agonize over their decisions and they would get at times very good or very bad advice from the Chorus of Internet Strangers. Or, younger people always wonder, “How much should I save?”

There’s no need for drama. You run one or more planners, take the answer, and go with it, no matter whether you’re many years from retirement or already retired. Re-run them every year, say on your birthday, and readjust. Every year’s estimate will be “wrong”, but as retirement gets closer and closer, you will zero in on your target.

Before you know it, you’ll be thinking about how to have that, “Boss, I’m retiring in a few months” conversation, which I am planning to have soon.

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What kind of safety margin did you allow for? ie: 125% or 150% or 200% etc. of what you felt you needed as a minimum?

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In the Flexible Retirement Planner and FIRECALC, I use a 95% probability of successfully funding my retirement. I have always used 95%. That’s a pretty high bar, but it’s possible for things to get worse than 95%, and for the retiree to have to cut back or find some more income somewhere.

In Fidelity I plan for a retirement score of 120 for the “market returns significantly below average” scenario. My Advisor likes the scores to be above 100, even though 100 means “100% funded”.

Another safety margin feature in Flexible Retirement Planner and FIRECALC is to use an income rule where the retiree gets throttled back following bad market years. In the Flexible Retirement Planner there are called the “Conservative” or “Flexible” plans. In FIRECALC you can simulate Bob Clyatt’s 95% rule: “Every year, take out 4% of portfolio value, or 95% of the prior year’s distribution, whichever is greater”.

My spending budget is being created using the stable spending rules, where you just spend more every year no matter what the market is doing… but in reality, I would not do that. After a bad year, I would follow some variety of the Clyatt Rule. I would cut back or at least skip the inflation adjustment. I just would have a hard time increasing my “pay” if I took a -15% hit.

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I just saw something interesting in OpenSocialSecurity.com

When planning my wife’s and my Social Security claiming strategy, it does seem to take into account the value of getting money earlier rather than later

Here are the options I turn on with a checkbox:

Still working

Mortality Table other than the 2021 Social Security Period Life Table. {I hard-code different in ages at death, and try out different scenarios. I am probably going to be fairly long-lived, she is not going to be}

Possible Future Cut in Social Security benefits {I used 17% cut in 2035}

OSS does suggest I take my benefit about a year earlier (69) than if there is no assumed future cut in benefits (70).

I found that interesting, and it makes sense. But note… it DOES NOT suggest I take the benefit at 62 !

I’m going to keep running it every year on my birthday and see what it predicts. Another very important parameter will be changing in the background… the program uses the 20-year US Treasury TIPS breakeven rate as its internal discount rate. That is set by the market, and could change a lot from time to time.

Also the date and severity of possible Social Security cuts will change over time. We all hope that the government will announce “it’s all fixed! No cuts forecast!”. I’m not betting on it.

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Nice find @ochotona ! Thanks for sharing !

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Here is a useful calculator I use to play with different scenarios for retirement.

It isn’t a sophisticated Monte Carlo model but it lets you enter many different variables and watch the results over time.

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The Monte Carlo feature is extremely extremely important because of market volatility year to year.

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If the full retirement age for SocSec is increased… it will become even more imperative that people consider taking the retirement benefit as close as possible to age 70, if they are good health and anticipate living into their 80s.

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I agree with that, but before you can run Monte Carlo, you actually have to build a plan first.

The 4 percent rule calculator website is very useful for playing around with different scenarios. For instance, it allows you to have two different withdrawal amounts which allows you to adjust withdrawals when SS kicks in. You can set a percentage withdrawal (4%, 5% etc. ) that is adjusted for inflation or you can enter in a fixed withdrawal amount if you know your expenses. It also allows you to enter in up to two pension amounts with different starting dates. You can play with different settings for inflation and rates of return for equities and fixed rate investments.

It doesn’t consider taxes (IRA/401K vs Roth) but if you want a calculator that can show you what happens with different scenarios, it is great. I use it before I talk to my financial advisor because the better informed my wife and I are, the better our planning goes with our expert. I love that my wife now uses the tool to put in her own scenarios - she thinks it is fun.

At the end of the day, whatever plan you come up with can go through the standard Monte Carlo analysis but even MC is only an estimate of success for your plan.