I took a look at the free retirement planner that comes with Empower, Fidelity, and Schwab and learn a bit about their limitations.
Setting up
All three allow you to setup Income sources such as Social Security and pension and specified when they will come into effect. You can specify if your pension is inflation adjusted or not.
Next you can add external accounts to round out your portfolio and examine the allocation. All of then appear to categorized most of the asset properly, except that none of them can classify ibonds. Empower allow you to manually classified assets. For the other two, you might get situation where an asset is unclassified and there is no way to fix it.
You must specify a location, it doesn't need to be an actual address, but you need to enter a state and zip. The planner uses the location to calculate taxes. You have to specify if you are single or married or have dependents.
Evaluating your plan
All of them run Monte Carlo and evaluate the success of your plan. Schwab's planner is too simple, it only states if you are successful or not. Both Fidelity and Empower will display a graph or a table. The graph allows you to see how the portfolio will look through time while the table allow you to double-check the numbers. Both show the 50th percentile and 10th percentile.
Empower is noticeably more pessimistic. A check in the documentation indicates that Empower assumes that you will always lose 1% from Fees and transaction. I am not entirely sure what Schwab's methodology is, but both Fidelity and Empower use top level asset classes to calculate return. So if you have a stock fund, it will use the total stock market index. The planners seemed to assume RMD from any retirement accounts at RMD age, which means if you have a lot of Roth, it may be off. The way both Fidelity and Empower calculate their taxes is not entirely correct. The documentation assumes that 85% of your social security is taxed. For the federal tax, it uses your filing status and standard deduction to calculate your taxes. Because each state handles retirement accounts differently, it also assumes 85% of the ss is tax and everything else is taxed at a flat tax rate. If you live in a state like CA with progressive tax, it uses 9.3% flat rate instead of the progressive curve. As a result, the taxes is likely to be off and probably more taxes than it should be.
Both Fidelity and Empower shows the result in today's dollar, which may seemed lower but it's because the value is adjusted for inflation. Fidelity allows you to show the graph in future dollars.
One issue I have with Fidelity is that you can't reclassified asset that are unknown, so large amount of asset shows up as Unknown, it may not be correct. In contrast, empower allows you to reclassified assets.
My issue with Schwab is that it gives too little information. I need more information that just whether i am successful or not. I feel like I am asking the magic 8 ball for answers.
Handling event and what if
Both Fidelity and Empower allow you to add events like buying a car in the future to try to handle lumpy expenses. Empower allows you to set up multiple profile, so you can set up what if and compare the profiles. May be you can model the effects if you purchase an expensive car for example.
Syncing
Syncing on Fidelity appears to work better on Fidelity, but that may be different from vendor to vendor, all of them have some problems with syncing. If your accounts uses 2FA, the problem gets even worse. However, if you are not constantly checking your account and use this may be once a year, it's not too hard to manually sync the accounts every time you use it. For those who don't want syncing, I believe you can manually enter the values, but then you have to figure out the assset allocation on your own.
I have not tried the Vanguard planner and don't know how the current set I mentioned compare to a paid service like New Retirement.
Setting up
All three allow you to setup Income sources such as Social Security and pension and specified when they will come into effect. You can specify if your pension is inflation adjusted or not.
Next you can add external accounts to round out your portfolio and examine the allocation. All of then appear to categorized most of the asset properly, except that none of them can classify ibonds. Empower allow you to manually classified assets. For the other two, you might get situation where an asset is unclassified and there is no way to fix it.
You must specify a location, it doesn't need to be an actual address, but you need to enter a state and zip. The planner uses the location to calculate taxes. You have to specify if you are single or married or have dependents.
Evaluating your plan
All of them run Monte Carlo and evaluate the success of your plan. Schwab's planner is too simple, it only states if you are successful or not. Both Fidelity and Empower will display a graph or a table. The graph allows you to see how the portfolio will look through time while the table allow you to double-check the numbers. Both show the 50th percentile and 10th percentile.
Empower is noticeably more pessimistic. A check in the documentation indicates that Empower assumes that you will always lose 1% from Fees and transaction. I am not entirely sure what Schwab's methodology is, but both Fidelity and Empower use top level asset classes to calculate return. So if you have a stock fund, it will use the total stock market index. The planners seemed to assume RMD from any retirement accounts at RMD age, which means if you have a lot of Roth, it may be off. The way both Fidelity and Empower calculate their taxes is not entirely correct. The documentation assumes that 85% of your social security is taxed. For the federal tax, it uses your filing status and standard deduction to calculate your taxes. Because each state handles retirement accounts differently, it also assumes 85% of the ss is tax and everything else is taxed at a flat tax rate. If you live in a state like CA with progressive tax, it uses 9.3% flat rate instead of the progressive curve. As a result, the taxes is likely to be off and probably more taxes than it should be.
Both Fidelity and Empower shows the result in today's dollar, which may seemed lower but it's because the value is adjusted for inflation. Fidelity allows you to show the graph in future dollars.
One issue I have with Fidelity is that you can't reclassified asset that are unknown, so large amount of asset shows up as Unknown, it may not be correct. In contrast, empower allows you to reclassified assets.
My issue with Schwab is that it gives too little information. I need more information that just whether i am successful or not. I feel like I am asking the magic 8 ball for answers.
Handling event and what if
Both Fidelity and Empower allow you to add events like buying a car in the future to try to handle lumpy expenses. Empower allows you to set up multiple profile, so you can set up what if and compare the profiles. May be you can model the effects if you purchase an expensive car for example.
Syncing
Syncing on Fidelity appears to work better on Fidelity, but that may be different from vendor to vendor, all of them have some problems with syncing. If your accounts uses 2FA, the problem gets even worse. However, if you are not constantly checking your account and use this may be once a year, it's not too hard to manually sync the accounts every time you use it. For those who don't want syncing, I believe you can manually enter the values, but then you have to figure out the assset allocation on your own.
I have not tried the Vanguard planner and don't know how the current set I mentioned compare to a paid service like New Retirement.
Statistics: Posted by gavinsiu — Tue Jan 23, 2024 6:10 pm — Replies 0 — Views 110