Retirement Calculators Fail to Achieve a Passing Grade

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By Jason Lilly (Advisor on

How comfortable would you be if you knew that the online retirement calculator you used, failed to muster a passing grade? Well, according to Texas Tech University researchers, that’s exactly what they found.

In a recent study, researchers tested 36 online retirement tools, including major players Vanguard Group, Fidelity Investments, T. Rowe Price Group, AARP, the Financial Industry Regulatory Group (FINRA) and others. The research team, which included well-known industry veteran Harold Evensky, found only 11 of the 36 worthy of a passing grade. The team cited overly simplistic tools as one of the main reasons for its harsh assessment.

For example, most of us are aware that health care costs have been rising faster than overall inflation, yet many calculators ignore the issue, which can have major consequences on retirement planning. The average person who has smoked throughout adulthood has a 6.5 to 15 year shorter life expectancy than a non-smoker. This point alone can have major implications on retirement planning.

In our opinion, even robust retirement tools are fraught with “irregularities”. All of these tools require assumptions about things like: returns, inflation, life expectancy, income and expenses, to name a few. As well intentioned and rigorously researched these assumptions are, they still remain, well, assumptions. Case in point, the average annual return for the S&P 500 over the last 87 years has been 9.5%. Over the last 50 years 9.61%. The average would imply an assumed 9.5% return for stocks is reasonable, yet, over the past 87 years care to guess how many times the S&P actually returned 9.5%? If you said zero, gold star for you!

But Hey, it’s Only Your Retirement Money


So, why does it matter, if returns still average out to 9.5%? We end up in the same place, right? Actually, no. And, it is because of the sequence of returns. The sequence has big implications when it comes to retirement planning and, unfortunately, cannot be pre-determined. Experiencing lower than “assumed” returns in the first few years of retirement can have major negative implications. Above average returns also change the calculus. So what do you do?

With a fail rate of almost 70%, results from online calculators should be taken with a healthy dose of caution. Calculators can provide directional consistency, however for a truly rigorous analysis turn to your financial advisor, who typically, has  more comprehensive and detailed software at his/her disposal.

Advisors are also subject to “assumption irregularities”, the difference, however, is a good advisor adapts and adjusts as actual results tip the assumption scale in one direction or the other. This is where the “rubber hits the road” and where an advisor’s value can really shine.

Similar to driving direction websites like MapQuest, retirement calculators can show you how to get from one place to another, but can’t adjust for unpredictability. Without more data, like real time traffic updates, you could find yourself sitting in a traffic jam as you make your way across town.   The same could be said for retirement calculators, without robust planning tools and consistent monitoring, your favorite retirement calculator could be taking you down the wrong road.

Jason Lilly, CFA, CFP®
Managing Partner, ARQ Wealth Advisors, LLC


  1. Paula Darcy says:

    I’ve been using one for a while, but I cross-check it with others and the results are so different! I can’t really afford lots of meetings with my advisor but I do use these calculators to run things by her and it helps us get more done during my appointments.

  2. R. L. says:

    Yeah I think calculators like this just serve to convince people that they’re ok for retirement

  3. P.O. says:

    I have long been skeptical of these calculators. Thanks for shedding light.

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