How to know If you’re on track for a nice retirement
October 22, 2009 · Tagged with Retirement
More companies are rolling out detailed and affordable services to help get your finances in shape. We tell you what’s good about them — and what’s not so good.
Can I afford to retire?
In the wake of the financial crisis, this question and its obvious follow-up — How can I better prepare? — are weighing on many people.
If you’re among them, help is at hand. Financial-services companies, eager to tap the baby-boomer market, are rolling out programs that offer, at little or no cost, a detailed assessment of whether you’re in danger of outliving your savings. Along the way, you’ll also receive advice on what to do if your savings are deemed insufficient and how best to tap your nest egg, or what’s left of it.
What’s the catch? First, there’s work involved; the programs can take hours to complete. Second, each company typically pairs you with a financial planner, who — not surprisingly — is likely to try to interest you in that company’s products. Finally, the programs focus on saving and investing; if you need guidance on other matters, such as estate or tax planning, you may be better off elsewhere.
That said, these services, for the most part, are a good mix of analysis, one-on-one advice and modest costs. As such, they can help you start or enhance your retirement planning.
Many American households, wealthy or not, don’t need enough hand-holding “to justify spending more than a few hundred dollars on financial planning,” says Chip Roame, managing principal at Tiburon Strategic Advisors, a Tiburon, Calif., consulting company that specializes in the financial-services industry. For many people, he adds, these programs “are a good fit.”
To help you sort through the options in this fast-growing area, we tested services, new and established, offered by four companies.
We asked each to provide a financial plan for Jack and Rose Ryan, a fictional couple we endowed with about $1.2 million in savings, plus a $600,000 home in Evanston, Ill. Concerned about job security, Jack — a 60-year-old executive at a newspaper company — wants to know whether he can afford to retire at 63. His wife, a 58-year-old public-school teacher with a generous pension, wants to retire around the same time.
The results? For the most part, the advice fell within conventional retirement-planning wisdom. Most of the firms, for instance, advised the Ryans to take the same basic steps, such as paring expenses and diversifying their stock holdings.
Still, there were important differences among the firms. Some caught possible problems others overlooked. Some mainly recommended their own products, while others were more eclectic in approach. More generally, some were considerably more optimistic than others about how long the Ryans’ savings would last.
Here’s what we found: