{"id":846,"date":"2016-05-02T17:16:02","date_gmt":"2016-05-02T17:16:02","guid":{"rendered":"https:\/\/www.pamkrueger.com\/?p=846"},"modified":"2018-12-20T15:58:13","modified_gmt":"2018-12-20T15:58:13","slug":"retirement-calculators-fail-to-achieve-a-passing-grade","status":"publish","type":"post","link":"https:\/\/www.pamkrueger.com\/retirement-calculators-fail-to-achieve-a-passing-grade\/","title":{"rendered":"Retirement Calculators Fail to Achieve a Passing Grade"},"content":{"rendered":"<p><em><strong>By\u00a0Jason Lilly<\/strong> (Advisor\u00a0on <a href=\"http:\/\/WealthRamp.com\">WealthRamp.com<\/a>)<\/em><\/p>\n<p>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\u2019s exactly what they found.<\/p>\n<p>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.<\/p>\n<p>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.<\/p>\n<p>In our opinion, even robust retirement tools are fraught with \u201cirregularities\u201d. All of these\u00a0tools 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&amp;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&amp;P actually returned 9.5%? If you said zero, gold star for you!<\/p>\n<p><strong>But Hey, it\u2019s Only Your Retirement Money<\/strong><\/p>\n<p><img loading=\"lazy\" class=\"alignnone size-medium wp-image-847 alignleft\" src=\"https:\/\/www.pamkrueger.com\/wp-content\/uploads\/1-1-225x300.jpg\" alt=\"1\" width=\"225\" height=\"300\" srcset=\"https:\/\/www.pamkrueger.com\/wp-content\/uploads\/1-1-225x300.jpg 225w, https:\/\/www.pamkrueger.com\/wp-content\/uploads\/1-1-110x146.jpg 110w, https:\/\/www.pamkrueger.com\/wp-content\/uploads\/1-1-38x50.jpg 38w, https:\/\/www.pamkrueger.com\/wp-content\/uploads\/1-1-56x75.jpg 56w, https:\/\/www.pamkrueger.com\/wp-content\/uploads\/1-1.jpg 420w\" sizes=\"(max-width: 225px) 100vw, 225px\" \/><\/p>\n<p style=\"text-align: left;\"><strong><!-- [if gte vml 1]><v:shapetype id=\"_x0000_t75\" coordsize=\"21600,21600\" o:spt=\"75\" o:preferrelative=\"t\" path=\"m@4@5l@4@11@9@11@9@5xe\" filled=\"f\" stroked=\"f\">\n<v:stroke joinstyle=\"miter\"\/>\n<v:formulas>\n<v:f eqn=\"if lineDrawn pixelLineWidth 0\"\/>\n<v:f eqn=\"sum @0 1 0\"\/>\n<v:f eqn=\"sum 0 0 @1\"\/>\n<v:f eqn=\"prod @2 1 2\"\/>\n<v:f eqn=\"prod @3 21600 pixelWidth\"\/>\n<v:f eqn=\"prod @3 21600 pixelHeight\"\/>\n<v:f eqn=\"sum @0 0 1\"\/>\n<v:f eqn=\"prod @6 1 2\"\/>\n<v:f eqn=\"prod @7 21600 pixelWidth\"\/>\n<v:f eqn=\"sum @8 21600 0\"\/>\n<v:f eqn=\"prod @7 21600 pixelHeight\"\/>\n<v:f eqn=\"sum @10 21600 0\"\/>\n<\/v:formulas>\n<v:path o:extrusionok=\"f\" gradientshapeok=\"t\" o:connecttype=\"rect\"\/>\n<o:lock v:ext=\"edit\" aspectratio=\"t\"\/>\n<\/v:shapetype><v:shape id=\"_x0000_s1026\" type=\"#_x0000_t75\" style='position:absolute; margin-left:-31.5pt;margin-top:-11.25pt;width:121pt;height:162pt;z-index:251658240'>\n<v:imagedata src=\"file:\/\/\/C:\\Users\\Louis\\AppData\\Local\\Temp\\msohtmlclip1\\01\\clip_image001.jpg\" o:title=\"\"\/>\n<w:wrap type=\"square\"\/>\n<\/v:shape><![endif]--><!-- [if !vml]--><img loading=\"lazy\" src=\"file:\/\/\/C:\\Users\\Louis\\AppData\\Local\\Temp\\msohtmlclip1\\01\\clip_image002.jpg\" width=\"161\" height=\"216\" align=\"left\" hspace=\"12\" \/><!--[endif]--><\/strong><\/p>\n<p style=\"text-align: left;\">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 \u201cassumed\u201d 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?<\/p>\n<p style=\"text-align: left;\">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\u00a0 more comprehensive and detailed software at his\/her disposal.<\/p>\n<p>Advisors are also subject to \u201cassumption irregularities\u201d, 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 \u201crubber hits the road\u201d and where an advisor\u2019s value can really shine.<\/p>\n<p>Similar to driving direction websites like MapQuest, retirement calculators can show you how to get from one place to another, but can\u2019t 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.\u00a0\u00a0 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.<\/p>\n<p>Jason Lilly, CFA, CFP\u00ae<br \/>\nManaging Partner, ARQ Wealth Advisors, LLC<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By\u00a0Jason Lilly (Advisor\u00a0on WealthRamp.com) How comfortable would you be if you knew that the online retirement calculator you used, failed to muster a passing grade? Well,<span class=\"excerpt-hellip\"> [\u2026]<\/span><\/p>\n","protected":false},"author":2,"featured_media":850,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Retirement Calculators Fail to Achieve a Passing Grade - Pam Krueger<\/title>\n<meta name=\"description\" content=\"How comfortable would you be if you knew that the online retirement calculator you used, failed to muster a passing grade?\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.pamkrueger.com\/retirement-calculators-fail-to-achieve-a-passing-grade\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Retirement Calculators Fail to Achieve a Passing Grade\" \/>\n<meta property=\"og:description\" content=\"How comfortable would you be if you knew that the online retirement calculator you used, failed to muster a passing grade?\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.pamkrueger.com\/retirement-calculators-fail-to-achieve-a-passing-grade\/\" \/>\n<meta property=\"og:site_name\" content=\"Pam Krueger\" \/>\n<meta property=\"article:published_time\" content=\"2016-05-02T17:16:02+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2018-12-20T15:58:13+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.pamkrueger.com\/wp-content\/uploads\/jasonlilly-blog.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"605\" \/>\n\t<meta property=\"og:image:height\" content=\"403\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Pam Krueger\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Retirement Calculators Fail to Achieve a Passing Grade\" \/>\n<meta name=\"twitter:description\" content=\"How comfortable would you be if you knew that the online retirement calculator you used, failed to muster a passing grade?\" \/>\n<meta name=\"twitter:image\" content=\"https:\/\/www.pamkrueger.com\/wp-content\/uploads\/jasonlilly-blog.jpg\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Pam Krueger\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.pamkrueger.com\/retirement-calculators-fail-to-achieve-a-passing-grade\/\",\"url\":\"https:\/\/www.pamkrueger.com\/retirement-calculators-fail-to-achieve-a-passing-grade\/\",\"name\":\"Retirement Calculators Fail to Achieve a Passing Grade - 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