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Check Again

Jonathan Clements

THE TWO-MINUTE CHECKUP is, I like to think, a unique financial tool: It aims to offer feedback across someone’s entire financial life based on no more than nine pieces of information. That’s an ambitious goal and—perhaps no surprise—some users have found the calculator wanting.

Meet Checkup 2.0.

Sanjib Saha, who writes for HumbleDollar when he isn’t busy writing software, and I went through all the comments that the calculator had received and made a host of changes. Let me highlight three of them.

First, we tweaked the “financial fitness” feedback. The original feedback compared users’ total savings to their earned income to see whether they were on track to have a big enough portfolio, as of age 65, to generate retirement income equal to half their salary.

Some users didn’t take kindly to that feedback. Many folks noted that the Checkup didn’t take into account the pension they were entitled to, while others simply didn’t like being told they were behind when it came to retirement savings.

To make the results more palatable, Sanjib and I changed the way they’re presented. The idea remains the same: We’re looking at whether folks are on track to have enough retirement income as of age 65. But now, we simply tell folks what percentage of their current earned income they’ll likely have as of age 65, assuming they continue to accumulate retirement savings at the same rate they have in the past. Note that users only receive this feedback if they’re single and still in the workforce or, alternatively, if neither they nor their partner are retired.

The second key change: We’ve allowed retirees to input their guaranteed income, such as Social Security, annuity income and pension income. Some users felt the calculator’s feedback was incomplete if this number wasn’t included.

Third, we tweaked the Checkup’s suggestions for couples where one is retired and the other is still working. This was a flaw in the initial version of the Checkup. I’d assumed most couples were either both retired or both working, but—based on the comments we received—I was badly mistaken.

Even with the revisions, I can’t promise that the Two-Minute Checkup will offer the exact right financial answers for everybody. Each of our lives is too unique for a simple tool to offer that sort of precision.

Instead, I have a different ambition: I hope the Checkup will make users think harder about their finances.

Are you saving enough and spending reasonably? Do you have the right stock-bond mix? Do you have too much debt? Are you taking the right steps to prepare for your children’s college costs? Do you have the right amount of emergency money? Do you have all the insurance policies and estate-planning documents that you need?

If the Two-Minute Checkup gets you to ponder such questions, I’ll consider it a success. Got friends and family members who aren’t so diligent about their finances? Please forward the Checkup’s URL to them. The two minutes they spend could make a lifetime of difference.

Jonathan Clements is the founder and editor of HumbleDollar. Follow him on Twitter @ClementsMoney and on Facebook, and check out his earlier articles.

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Cammer Michael
Cammer Michael
3 months ago

You haven’t fixed the problem that we want it to say that we have plenty of $ for retirement and should relax about this. I guess you can’t fix this part…

Jonathan Clements
Admin
Jonathan Clements
3 months ago
Reply to  Cammer Michael

If the “financial fitness” feedback says you’re on track to replicate xx% of your income in retirement and that seems like a reasonable percentage to you, wouldn’t that suggest you can relax?

tshort
tshort
3 months ago

I like it! Nice work on the upgrades and including the ability to add SSA/pensions input.

Quibble: my wife and I have an 8 year age difference, are both retired, and neither one of us has started claiming SSA, so we currently have nothing coming in each month. I may start SSA in 3 years, and she will probably wait 15 years. Not really able to reflect that timing in the checkup.

So for the next few years we will have to draw our annual ‘income’ from our portfolio, which has always been the plan. But the calculator doesn’t account for the timing of the future SSA income streams coming on, which will greatly effect the drawdown rate in the meantime.

Jonathan Clements
Admin
Jonathan Clements
3 months ago
Reply to  tshort

Thanks for the feedback. Because the Checkup is a “snapshot in time,” it would be hard to incorporate future income, but maybe we can find a way to build that into some future iteration. One thought: You could look at yourself today, and then run the numbers again as though you’re three years older and just claimed Social Security.

Last edited 3 months ago by Jonathan Clements
tshort
tshort
3 months ago

Actually, that worked well using my age and a conservative estimate of how much our portfolio will be worth three years from now. Also did not include wife’s SSA at all since her claiming date is a ways off.

That means the result is quite conservative, and still well within the range we’ve been planning around. So that’s reassuring – which is just what the two-minute check is intended to help one figure out: Are we in the ballpark or not? Nice.

mytimetotravel
mytimetotravel
3 months ago

I believe I was one of the complainers, so thanks!

I am about to close on the sale of my house and will move to a CCRC next year, so thanks for reinforcing the fact that I no longer need much of an emergency fund. Maybe I can buy a new car with it instead of incurring capital gains by selling part of the new car fund.

Andrew Forsythe
Andrew Forsythe
3 months ago

Thanks, Jonathan and Sanjib. This is a great tool and its simplicity is a virtue.

Jeff Bond
Jeff Bond
3 months ago

I think the updated version provides a much better sanity check. It’s much easier to do quick “what if” scenarios. Thanks.

baldscreen
baldscreen
3 months ago

Hi, this is Chris. Jonathan, Sanjib, thanks for tweaking the checkup. I tried it again, and found it to be right on target with what I am projecting for our retirement in a few years. One thing that I found especially helpful was your advice about how much to have in an emergency fund and a house repair fund. We have these, but was grateful to see specific dollar amounts in line with what I thought too. I am not a financial person at all, and have had to learn things on my own through the years. I was very happy that spouse and I have already taken much of what you would advise for us to heart.

Jonathan Clements
Admin
Jonathan Clements
3 months ago
Reply to  baldscreen

Chris, thanks for trying it out. Glad you found the Checkup helpful!

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