Which Retirement Planning Program?

A retirement planning program is in much demand by visitors to Retirement-Planning-Central.com. However, it is with reluctance that I attempt an opinion – even after extensive research.

The recession, many call it The Depression, that started in 2007 has caused havoc in the retirement investment planning market. Interest rates and returns on investment have reached an all time low. Thousands of Baby Boomers postponed their retirement. But for many retirees, like myself, who relied on an investment portfolio that was planned with great care, alarm bells are ringing.

No retirement planning program or simulation anticipated the severity of this recession.

In 2003 a report was published on a study done jointly by LIMRA International (a worldwide association of insurance and financial services companies) and the Society of Actuaries, in collaboration with the International Foundation for Retirement Education. They evaluated several programs and tools available to consumers at that time.

The report warned that consideration should be given to the many risks retirees face by the developers of these programs. These risks include, but is not limited to:

  • Longevity
  • Inflation
  • Investment
  • Health

Under Investment risk the report states: “When previous generations of retirees invested in equities, it was less likely that they needed to rely on these funds as today’s retirees must. Another investment risk is interest rate risk. A common strategy of people who retired a decade or two ago was to invest their retirement assets very conservatively in fixed income products such as certificates of deposit or fixed rate annuities. They saw their income decrease upon renewal of these products as interest rates declined since then.”

The report concluded on the programs evaluated:

  • Their value is in helping people estimate income, retirement needs, and spending.
  • The programs are generally not developed to address retirement risks. Instead, the tools mainly mask risk.
  • The programs varied greatly on their inputs and how to treat various situations.
  • Because of the variety in the programs’ inputs, capabilities, and results, direct comparisons of a wide range of results was impossible.
  • With results that vary across programs, it was recommended that, where possible, consumers or financial professionals working with them run multiple programs and use multiple scenarios within each program.
  • These programs are merely tools to help facilitate the retirement planning process and there is no right answer. Nor is there any general agreement on the right answer or how to arrive at it.

The retirement planning programs available today do not do an adequate job in their treatment of most post-retirement risks. Such risks are likely to be incorporated during discussions with financial professionals.

At the time of the study, six consumer programs were evaluated. Of these six companies only two still offer a related product. One calls it a Strategy Generator while the other calls their product a Simulator.

The other companies still in business now offer the services of their financial professionals to consumers.

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