The performance of retirement planning software, including programs used by financial advisers, came up short in a new study sponsored by the Society of Actuaries and the Actuarial Foundation.
Six of the 12 programs in the study are designed for use by financial planners to help their clients. The rest are designed for use by individuals; one is available for a fee and five are available for free over the Internet.
“The majority of available tools are still not effectively addressing the wide range of individual issues related to retirement,” according to the report. The programs, and especially the consumer products, “need to do a better job of helping the user focus on and understand key issues such as rates of return, life expectancy and the length of the planning period, timing of Social Security benefits receipt, use of home equity in retirement, and survivor’s benefits.”
Except for financial market risks, most of the programs do a poor job of evaluating the risks that retirees face and actually obscure some potential risks, the research found. For example, the programs generally were unable to analyze the risks of variable rate mortgages or large declines in housing prices. Most of the programs “did not consider the possibility of a large stock market and housing market decline occurring at the same time that a person nearing retirement has lost a job,” according to the report.
Tying in with the report, the SOA sponsored a phone survey of 1,365 non-retired individuals over the age of 18 to gauge their attitudes toward retirement calculators and related tools. That survey found that 55% are skeptical about retirement software and online tools, saying they have little to no trust that they provide an adequate assessment for retirement planning purposes. Only 10% use them, the poll found.
The report, which was released Dec. 30, is available online at www.soa.org.
Already Registered?
If you have already registered to By The Numbers, please use the form below to login. When completed you will immediately be directed to post a comment.
Not Registered?
You must be registered to post a comment. Click here to register.
1 Comment(s)
Posted by: take 5 | January 6, 2010 8:10 AM
I must be part of the ten percent; I like the calculators; where else can I get this info and where else can I manipulate different scenaros?
Dinkytown's are the best so far, but I also like vanguard's instant quote for annuities.
As far as predicting declining house values in a calculator, you are asking too much for a static program. However you can manipulate most with value targets that suggest declines and / or growth.
The other positive about these calculators is that they get one to realize that if I don't start saving now then when? No one is going to do it for me. It's up to me. After using them for 10 plus years, I'm glad I increased those savings amounts when I did.
I could never get to where I am now without all of that scenario planning.
Report this Comment
Add Your Comments...