online retirement calculators: unreliable

[bigred]

FYI. You're welcome.

[rjh01]

That is a generalisation.
- Which ones are you talking about?
- In what ways are they unreliable?
- Evidence?

[The Atheist]

That is a generalisation.

Yeah, that's a generalisation like the Pacific Ocean's wet!

Can you just give a little more detail, please bigred? As it stands, it seems that you're accusing all online retirement calculators as "unreliable".

I can think of one major one (http://www.sorted.org.nz/)immediately which is 100% reliable.

[JonnyFive]

FYI. You're welcome.

Eh? What do you mean? That they're generalized and therefore not perfectly reliable? That they're all unreliable in general?

As with any mathematical model, a retirement calculator is going to make a lot of assumptions. However, that doesn't mean it is unreliable as a general guide, just that it doesn't have perfect predictive power.

If you know of a retirement model that does have perfect predictive power, please send me a PM... I'd be interested in starting a second career as the most successful financial planner in the universe.

[The Atheist]

I'd be interested in starting a second career as the most successful financial planner in the universe.

I have a map of Magrathea you may be interested in.

[bigred]

Please, point me to those that are reliable. One will do.

Evidence? How about they spit out (often highly) different answers given the same data? This means that at best only one is reliable. Again, if you determine which one that is - assuming it exists - let me know.

Need more data? Check the Aug issue of Kiplingers. They laid it out well IMO.

[The Atheist]

Please, point me to those that are reliable. One will do.

Evidence? How about they spit out (often highly) different answers given the same data? This means that at best only one is reliable. Again, if you determine which one that is - assuming it exists - let me know.

Need more data? Check the Aug issue of Kiplingers. They laid it out well IMO.

Ok, now I see the problem.

The reason they will differ from each other and also be completely unrelated to the actual results achieved is actually a good thing - if you want to remain a sceptic.

If they were all 100% accurate, that would indicate that the calculators are actually psychic as there's no other way of telling precisely what the future is going to bring and returns are subject to investment success and failure.

If you want some genuine information on retirement, I gave you a link to the NZ Gov't site - Sorted (http://www.sorted.org.nz) - where you won't get any more accuracy on what actual returns you will receive, but you will get honest information on how to form a retirement/savings strategy. The fact that it's a non-US site is irrelevant because the rules are the same and the site doesn't recommend any approach over another, it simply shows the benefits of differing plans.

[rjh01]

Please, point me to those that are reliable. One will do.

Evidence? How about they spit out (often highly) different answers given the same data? This means that at best only one is reliable. Again, if you determine which one that is - assuming it exists - let me know.

Need more data? Check the Aug issue of Kiplingers. They laid it out well IMO.

No please, you are making the claim. I think you will need to provide some links and spell out what you are talking about. A projection 10 years into the future will make certain assumptions. These should be spelled out. Examples
- Inflation (high low). Are we talking about todays money?
- Earning rates of funds. Related to above but these can be huge differences
- Salary increases.
- Age of retirement
- Different laws in different areas. This includes taxation.
- Are the results before or after tax?
- Death benefits.
- What happens when you die at age 70? Is the money given to your next of kin or is it given to the company?
- Do you get a pension forever or does it cut out at a certain age?

I am not going to do your research for you. Never heard of Kiplingers. Once you have made your case then I and others should look at it and see if it is any good. If you have any good points then it is reasonable that someone else should do some more to make the case even better. You are no where near that stage.

[bigred]

I am not going to do your research for you. Never heard of Kiplingers. Given this is easily one of the most highly respected and popular finance magazines worldwide, you didn't do worlds for your credibility there, frankly. That's kind of like arguing astronomy and going "never heard of Steven Hawking."

Once you have made your case then I and others should look at it and see if it is any good. If you have any good points then it is reasonable that someone else should do some more to make the case even better. You are no where near that stage.lol :rolleyes:

You seem to be under the impression that I give a tinker's damn whether you or anyone else agrees w/me or not. I have done my research. If you are too lazy to do your own and disagree w/me "just because," that also speaks for itself.

But hey, have it your way. They are all extremely accurate - even though they spit out quite different answers. Yep that makes sense. So pick one and count on it as being extremely reliable. You'll likely get what you deserve.

[rjh01]

The magazine you refer to is an American magazine. I live in Australia where that magazine is not generally available in newsagencies.

I do not claim to know much about the subject. Even if I did then I would not at this stage admit it. Just that so far you have not made any sort of case.

[Esperdome]

I just took one, http://cgi.money.cnn.com/tools/retirementplanner/retirementplanner.jsp, and I agree it sucked in that it wasn't tailor made for my situation, but it did say I was 84% able to meet my retirement goals.

What is it about them bigred that you think sucks?

Edit: Oh I see, the accuracy. Well if they would just hire a psychic or two...

[JonnyFive]

But hey, have it your way. They are all extremely accurate - even though they spit out quite different answers. Yep that makes sense. So pick one and count on it as being extremely reliable. You'll likely get what you deserve.

I'm not convinced that anyone really believes that any retirement calculator is "extremely reliable." The idea seems to be that they will give you a very rough ballpark idea of whether or not you're on the right track. Obviously, there are a number of highly complex and chaotic factors involved in this, so certainty is essentially impossible when modeling this situation.

From a position of risk analysis, this is an extremely common issue. The more you move into the future, the greater the number of unpredictable factors come into play, and the more difficult it becomes to model the outcome with absolute certainty.

As rjh said, the assumptions in the model should always be spelled out. To not do this is somewhat dishonest, as it may lead the unsophisticated user to put more trust in the model than they really should. However, the generalize that into "they all suck" is somewhat... coarse.

Perhaps you should expand more on your OP. You have issues with the assumptions at play? You think the creators of these calculators are misleading unsophisticated consumers? What's the deal?

[Antiquehunter]

I'm not sure a simple calculator is an appropriate tool for such discussions, in any event. So many considerations have to be taken in light. Some of these considerations CAN be assigned a numeric value or range - but retirement planning is SO unique to the individual.

Let me put it to you this way? I'd be willing to put my financial plan up here, and I'd bet a LOT of money that I'd get 5 different opinions ranging from 'You're an idiot and you're going to end up picking bottles out of dumpsters when you're 75' to 'You have it all figured out, and please invite me to your home for a glass of 'Grange' when you have worked your last day'.

Are online calculators unreliable? Well, I'm sure some are better than others. But, they're only one small part of a retirement planning discussion - which is probably the reason that some people view them in a negative light.

[Langis]

Is a retirement calculator anything like those sites that tell you when you're going to die? :boxedin: :D

[rjh01]

I note the fact that bigred who made the OP has made only posts that are either very vague, general or abusive. He has not made any positive contribution to the thread.

[RecoveringYuppy]

Is a retirement calculator anything like those sites that tell you when you're going to die? :boxedin: :D
In a previous life I taught computer programming to math types, mostly actuaries. One of the examples I'd use when the class was mostly actuaries was a retirement calculator that told you when your money would run out. That entry on the form would be labeled something like "you need to arrange your death for 6/17/2012".

[JonnyFive]

In a previous life I taught computer programming to math types, mostly actuaries. One of the examples I'd use when the class was mostly actuaries was a retirement calculator that told you when your money would run out. That entry on the form would be labeled something like "you need to arrange your death for 6/17/2012".

Or use that as the date when you need to start robbing banks and living off the grid. It's all a risk/reward balancing act. :D

[SpaceMonkeyZero]

The thing I wish retirement calculators would show you is how much your final total is worth... in today's dollars... to get a general idea how much you'll have. It's guessing at your financial growth... Why can't they guess for inflation?

$5 million in 2050 might get you a waffle iron. :)

[Antiquehunter]

Most of the better ones do. Every calculator I've ever used calculates for inflation, many of them allow you to adjust upwards (or downwards) depending on your tolerance for risk.

[drkitten]

The thing I wish retirement calculators would show you is how much your final total is worth... in today's dollars... to get a general idea how much you'll have. It's guessing at your financial growth... Why can't they guess for inflation?


Most of them can, and do. But that's just another assumption -- and so that's one more "inaccuracy" that our OP will complain about.

$5 million might not be enough for a waffle iron in 2050. There might not be any more waffle irons, when waffles are demonstrated to cause neuromyxomatosis and fall dead out of fashion.

[Langis]

In a previous life I taught computer programming to math types, mostly actuaries. One of the examples I'd use when the class was mostly actuaries was a retirement calculator that told you when your money would run out. That entry on the form would be labeled something like "you need to arrange your death for 6/17/2012".

Ah, I see. Cool.

[bigred]

I'm not convinced that anyone really believes that any retirement calculator is "extremely reliable." The idea seems to be that they will give you a very rough ballpark idea of whether or not you're on the right track. They don't even do that. Well OK maybe some do, but there's no way of even having a modest confidence in that being true, given how wildly they can vary.

Obviously, there are a number of highly complex and chaotic factors involved in this, so certainty is essentially impossible when modeling this situation. I'm not taking certainty. That is obviously impossible. I'm talking even a modest or realistic degree of believability.


Perhaps you should expand more on your OP. You have issues with the assumptions at play? You think the creators of these calculators are misleading unsophisticated consumers? What's the deal?I think that since they on the whole are exceedingly inconsistent in their conclusions - not to mention the way they draw those conclusions - they have extemely little if any value. Yes, whether intentional or not, they are misleading.

For those of you in the states, browse thru Kiplinger's Aug issue and you'll see what I mean.

[boooeee]

I note the fact that bigred who made the OP has made only posts that are either very vague, general or abusive. He has not made any positive contribution to the thread.

You may want to copy that to your hard drive and keep it handy. It could save you some typing in the future.

[JonnyFive]

They don't even do that. Well OK maybe some do, but there's no way of even having a modest confidence in that being true, given how wildly they can vary.

But if the model parameters are explicitly stated, then why aren't they useful as a rough guideline? The more up-front the parameters are, the more confidence you can have in the model's accuracy - or inaccuracy.

I have a little calculator in Excel to figure roughly how much money I'll have in my 401(k) given various levels of contribution and assuming a conservative rate of return. It is the roughest possible model, and it doesn't even correct for inflation, but it gives me the vaguest idea of where I will be in x years, from which I base more detailed plans.

Obviously, models based on different assumptions and using different parameters will vary. Again, the idea is only to get the roughest idea of where to start, and the more you know about the mathematical model the more you can potentially do with it.

I'm not taking certainty. That is obviously impossible. I'm talking even a modest or realistic degree of believability.

Okay, so why do you think this? Do you believe the models make too many assumptions? That would be a fair criticism, but what would you propose instead?

I think that since they on the whole are exceedingly inconsistent in their conclusions - not to mention the way they draw those conclusions - they have extemely little if any value. Yes, whether intentional or not, they are misleading.

I suppose if one was truly trying to do extensive financial planning using an online retirement calculator, that would be true, but does anyone really think that this is a substitute for detailed, personal financial planning?

I guess what I'm looking for is some exposition on your OP. I don't think anyone with half a brain thinks they can just plug some numbers into a simplistic model and get a bulletproof financial plan for the next two decades. That being said, what's so wrong with having a simple model for approximation?

Taking a look at the CNN calculator, for example, it seems to be quite up-front with the various assumptions it makes. It's value doesn't extend much beyond the "hey, I'm doing all right" or "oh ****, I'm in deep doo-doo," but it doesn't claim to extend beyond that.

[Segnosaur]

Is a retirement calculator anything like those sites that tell you when you're going to die? :boxedin: :D


No, for that you nead the death clock, as featured in the tv series Futurama.

http://en.wikipedia.org/wiki/List_of_fictional_devices_in_Futurama#Deathclock