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NOW THAT YOU’VE taken the Two-Minute Checkup, maybe you want further information—and perhaps you’re ready to begin fine-tuning your finances. Here are 14 questions and answers to get you started.
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Interesting. I’d say this is a great tool for when you’re starting out.
Retirement is a tough nut to crack because of the incredible number of variables in play, so there are going to be gaps. One solution might be allowing people to modify some assumptions.
1) We are early to mid 50’s, and our income has climbed 50% in the past couple years. That’s difficult for any automated engine to track appropriately. If I use our old income, our multiple looks very good, the new one, we’re lagging.
2) We do have additional RE we will eventually sell, and a business of indeterminate value. Well, there’s a traditional valuation method that puts it at about 20% of our current assets, but it’s upset by current market conditions and demographics, so I look at ranges that do and don’t include it.
3) Investment returns seem low. That may be because I’m an aggressive investor (75/25). Our investments have earned a 9.18% CAGR over 27 years, so I project at about 8.5% and declining to 7% nominal returns.
4) My wife will work several years after I retire. I’m thinking sometime in 3 to 5 years for me. She’s younger and her earning power has recently grown so fast that it it may soon cover all our expenses and savings.
I really like what you have put together. One additional feature that would be nice is if you could input the age at which you plan to retire for those of us who don’t plan on retiring at 65.
Great tool, thanks for providing!
I wonder what the assumptions are about retirement needs. The results said my investments were well above target for my age, but also said I needed more to retire with half my current income. Does that mean to retire immediately, in my 50s? Does that mean that the assumption is being made that Social Security will provide the other half? Or is the assumption that I will need only half my income to spend in retirement?
In terms of financial fitness, the Checkup looks at net worth as a multiple of earned income, with the goal of being at 12 times income as of a retirement age of 65. If you have 12 times income saved and you use a 4% withdrawal rate, your portfolio should be big enough to replicate half of your pre-retirement salary. Throw in Social Security and you might be at 70% or 80% of pre-retirement income. You can read more about how the calculator works here:
It’s very good of you guys to translate your time, effort, and possibly expense, into a fast, free tool for everyone.
The fast/simple theme precludes many of the detailed inputs that a financially minded humble dollar reader would desire.
It would be quite useful to those who are just beginning their journey to financial sophistication.
I am guessing too little input and heavy extrapolation from typical wisdom have skewed the results to be of any value (to me).
The result makes generic conclusions none of which makes sense to me.
For example, here are some of the dubious advice from the result:
Useless? Far from it. The Two-Minute Checkup is built on well-established financial-planning principles. You took it, thought about your own finances and decided how you differed. I’d call that a major success.
My apologies if I have hurt your feelings! It was definitely not what I intended. I was not a judgment call of the product by any means. I am sure a lot of readers will find it super helpful. I did not but it does not mean much, if anything at all. I am an ardent fan of your newsletter. You are one of the very few people trying to make a true difference in our personal finance lives. Thank you so very much for your dedication and effort.
when you are financially independent (as I am sure Jonathan Clements is), been through 2 divorces and has seen millions of reader comments while at the WSJ, you are not easily hurt by useless comments.
Sandip, thanks for trying the tool out. So we can eliminate any potential software bug in the tool and improve it further, would you mind sharing a bit more about the specific issues you raised?
The suggestions are based on certain assumptions and ballpark estimates as outlined in https://humbledollar.com/about-the-checkup/. Could you please check those and share which of those didn’t apply to you by a large margin? That way, we’d get a better sense of why your results are so different than your actual situation, and whether the difference is attributed to something specific/unique to an individual’s personal finance situation (e.g., the tool may be off for a person whose accumulated assets are mostly outside any financial account – rental property and things like that, or someone who has an uneven income that got a very high recent bump, etc.).
A person with low living cost and a reasonably high income is likely to have a sizeable amount in financial accounts. The tool will show a high savings need for retirement if the financial assets are low and there isn’t enough time for it to grow. Based on your feedback, it seems the tool is suggesting something like this to you. Would you mind sharing some insight on why this is the case? Also, is your financial fitness suggestion OFF too?
FWIW, the “suggested savings” can in theory be more than the current income, because the tools assumes that the person is capable of earning more than the current income.
I didn’t understand the inappropriateness of the “College” suggestion. The tool can’t be too optimistic about children getting scholarships at a future time. Saving for college is something a parent can control and that’s why the tool suggests so. BTW, congratulations and best wishes to your daughters.
Sanjib, Thank you very much for your reply! I am afraid that I have offended many readers with my post. I should have watched out my words instead of blurting out my comments. So to avoid any further discord I respectfully pass your offer for further input. Hope you will not mind. All the best to the checkup tool. I hope Jonathan will forgive me for my comments. Thanks again!
This might be useful for a younger person who is earning a salary, but it seems misleading for a retiree with pension/SS income, and only considering “financial accounts” without home equity or mortgage status. A retiree who is renting or has a high mortgage balance has very different income needs than one whose house has been paid off. Likewise, any pension/SS either has to be entered as “stable employment income” (which seems incorrect) or has to be converted to a net present value and added to the financial account total.
You’re correct that a retiree who is renting or has a mortgage will have higher monthly expenses. That said, if the retiree has a mortgage balance, he or she presumably owns an asset — a house — that’s at least as valuable, so that isn’t necessarily a dire situation. Meanwhile, the calculator feedback under “spending” for those who are retired notes that, in addition to the suggested portfolio withdrawal, a retiree may have Social Security and other income. If you include Social Security etc. in the “salary and wages” input, the calculator may give you strange results — because that input drives many of the suggestions for those still in the workforce.
For All financial accounts, should I be entering my partner’s and mine, or just mine?
Also, I changed the age by 10 years and the only difference in the result was saying I should have 11x saved instead of 7.6x.
Which raises an important question. This is what the model recommendation is, but I’m above the 90th percentile for wealth in US. And the model says I’m 7x to 11x underfunded. So what does this say about the ability of most people to retire comfortably or the assumptions of the model?
Yes, you should include the financial accounts for both yourself and your partner. Meanwhile, take another look at the “financial fitness” feedback. I think you may be misreading it. The multiples reflect your net worth as a multiple of your earned income, not the degree to which you’re underfunded.
Thank you: nice quick tool. want to pass on to children as a reminder tool. Being retired, it was beneficial to be reminded of longterm care need or not dependent on resources.
Always a welcome help.
Fun! I’m retired. So is my husband. But since he receives a pension I marked him as employed and entered net yearly income from pension. However, why do you not ask for debt from mortgage?
Keep in mind that a key goal with the calculator is simplicity, Why doesn’t it ask about mortgage debt? If you have a mortgage, presumably you have a home of at least equal value, so it’s not a pure liability, like other debt. Meanwhile, most retirees are well aware of what they’re receiving in pension and Social Security income, so asking for that info and then simply playing it back to users seems unnecessary. If you enter such income in the “salary and wages” input box, there’s a risk the calculator will give you strange results. The “salary and wage” info is, instead, a key driver of the analysis offered to those still in the workforce.
very nice! appreciate the ballpark withdrawal information
I just tried it, and it is a nice and simple tool. Thank you, Jonathan!
I’m retired. Must have a glitch as it would not allow me to enter my retirement income. Consequently no results were generated.
Thanks for trying it out. If you say you’re retired, the “annual salary or wages” input is disabled, because you presumably have little or nothing in the way of earned income. Instead, the calculator will analyze your finances based on the other inputs.
Tried this morning. Doesn’t work on my iPad, which is a newer one.
Got it to work.
If for some reason the calculator doesn’t work when you first load it, try hitting your browser’s refresh button.