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Two-Minute Checkup

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Hungry for More?

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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Peter Blanchette
Peter Blanchette
27 days ago

Your “Two-Minute Checkup” should ask a few more questions to be able to assess someone’s situation fully… like…1) estimated yearly expenses,2) renting or homeowner, 3)LTC insurance or not,4)life insurance or not. By not asking these questions you suggest that I do not withdraw more than $40K per yr from retirement savings(not needed based on my income and expenses). My income and expenses do not warrant that kind of advice. Also, given the information I provided I could easily, given a fair analysis, purchase a home of reasonable price(I do not live in Ca). Plus, you recommend keeping 5 years worth of needed funds in cash/bonds which imply an asset allocation upwards of 30 % bonds/cash and 70% equities and other assets based on the information provided in your “Two-Minute Checkup” My future retirement asset needs do not warrant such an aggressive risk tolerance profile. Be careful in the recommendations you provide based on incomplete information.

JOHN GARRY
JOHN GARRY
2 months ago

For income, when I put in the amount of money we take home after maxing IRA, almost maxing deferred comp it seems inline with other calculations on other tools. When I put in our gross base salary, it tells me I should try to have a nest egg about twice as high as what I estimate. This type of extreme gap puts this outside the range of what I would consider a useful tool for most people. The initial number I got I would see as ridiculously unattainable. I think I know better, but it would risk being discouraging to people looking for a simple tool rather than motivating. Maybe that’s just my case. I appreciate the effort and intent.

Last edited 2 months ago by JOHN GARRY
Jonathan Clements
Admin
Jonathan Clements
2 months ago
Reply to  JOHN GARRY

The Checkup may offer you two gauges of your retirement readiness. First, under “financial fitness,” it says what percentage of your income you’re on track to replicate upon retirement. If that looks good, you should feel reassured. Second, under “retirement,” it’ll tell you how much you need to save to replicate half your current household income upon retirement. If you don’t want to replicate that much, couldn’t you look at the number and say to yourself, “I don’t need as much as that”?

Jon Daley
Jon Daley
2 months ago

It’s always interesting to me that most financial planners assume that current spending is basically all of the current income, and so my retirement spending is therefore based on current income as well.

Our spending has been loosely correlated with past income (though being self-employed means my income goes up and down and my income mostly stays the same).

This year, my income has gone significantly up (250%) and we only have plans to spend a little more, though saving a lot more.

I would appreciate an input for retirement spending, rather than an automatic calculation based on current income.

Jonathan Clements
Admin
Jonathan Clements
2 months ago
Reply to  Jon Daley

Thanks for the suggestion. The Checkup’s “financial fitness” feedback tells you what percentage of your current income you’re on track to replicate. If the Checkup says you’re on track to replace, say, 40%, and you know that’ll be enough, once you add Social Security and any other income you’ll have, would there be much value added by including an input for expected retirement spending? One of the goals for the Checkup is simplicity, and I only want to add new inputs if folks feel it’s a large shortcoming.

Marla Mccune
Marla Mccune
2 months ago

I fast forwarded it with some guestimates for when I am in my 70’s and found it quite reasuring as a very general estimate. Thanks much!

Bill Cason
Bill Cason
2 months ago

A 75-year-old retiree and a 99-year-old retiree withdraw the same absolute amount from the same absolute-sized portfolio. One will most likely leave a large legacy? Maybe I am making a mistake somewhere?

Jonathan Clements
Admin
Jonathan Clements
2 months ago
Reply to  Bill Cason

Maybe this isn’t the biggest surprise you’ll get today: We didn’t spend time focusing on whether the Checkup worked well for the typical 99-year-old. For retirees age 51 and above, the Checkup suggests an annual withdrawal equal to 4% or 5% of current savings — a strategy I like because you’ll never run out of money. Instead, spending in retirement is forced to rise or fall along with the size of your nest egg. What if you’re age 99? I rather doubt most 99-year-olds are carefully calibrating their annual portfolio withdrawals. But if they were, they’d probably realize that the end of life may involve a few years of massive spending to cover long-term-care costs, so — while a 10% or 20% annual withdrawal rate might seem doable — it perhaps wouldn’t be prudent.

Harry Crawford
Harry Crawford
2 months ago

It would be better if it asked for the spouse’s age also. This can make a big difference, meaning the money has to last a lot longer based on the younger age.

Jonathan Clements
Admin
Jonathan Clements
2 months ago
Reply to  Harry Crawford

Thanks for the suggestion. Yes, the spouse’s age could be a useful addition. Ditto for home value, mortgage debt, Roth vs. traditional vs. taxable accounts, and so on. It’s just a question of how much complexity to introduce. I like that Sanjib and I have kept it to nine inputs, and it’s question of whether increasing the inputs would result in significantly greater value for the user.

jeffrey1949
jeffrey1949
2 months ago

Very helpful. Should we presume that the monthly withdrawals from the portfolio are pre-tax? Whether or not the withdrawals are from tax-deferred accounts could affect spending.

Jonathan Clements
Admin
Jonathan Clements
2 months ago
Reply to  jeffrey1949

Yes, you should presume the withdrawals are pretax. But your point is important: If the dollars are coming out of, say, a Roth rather than a traditional retirement account, you’ll have more money to spend on groceries.

Beth Henary Watson
Beth Henary Watson
3 months ago

This is nice! While like many programs it cannot factor in every nuance of each situation, it is a great way to see if, generally, you are on track.

Roboticus Aquarius
Roboticus Aquarius
5 months ago

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.

brianp260
brianp260
5 months ago

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.

Sam Sussenguth
Sam Sussenguth
5 months ago

Great tool, thanks for providing!

Jane
Jane
5 months ago

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?

Jonathan Clements
Admin
Jonathan Clements
5 months ago
Reply to  Jane

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:

https://humbledollar.com/about-the-checkup/

M Plate
M Plate
5 months ago

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.

Sandip Lahiri
Sandip Lahiri
6 months ago

Useless.

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:

  1. it is making unrealistic assumptions that I will need a significant amount of current income in my retirement. Then it estimates I need to save more than my yearly income every year.
  2. It advises me to cut $18K+ of fixed costs by reducing mortgage, rents, cable bills etc. I do not have any of these expenses. My fixed costs are small and limited to essentials.
  3. It is asking me to save and buy 529 plans, as one of my kids are over 21. My kid got a near free education from local state university. And is loaning from Federal govt. for her MD. The other one will probably get money from her state school for her undergraduate studies.
Jonathan Clements
Admin
Jonathan Clements
6 months ago
Reply to  Sandip Lahiri

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.

Sandip Lahiri
Sandip Lahiri
5 months ago

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.

johny
johny
4 months ago
Reply to  Sandip Lahiri

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.

Last edited 4 months ago by johny
Sanjib Saha
Sanjib Saha
5 months ago
Reply to  Sandip Lahiri

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.

Thanks again.

Sandip Lahiri
Sandip Lahiri
5 months ago
Reply to  Sanjib Saha

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!

Monica Britton
Monica Britton
6 months ago

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.

Jonathan Clements
Admin
Jonathan Clements
6 months ago
Reply to  Monica Britton

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.

Cammer Michael
Cammer Michael
6 months ago

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?

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

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.

Klaus Barre
Klaus Barre
6 months ago

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.

Thank you

Carol Buck
Carol Buck
6 months ago

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?

Jonathan Clements
Admin
Jonathan Clements
6 months ago
Reply to  Carol Buck

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.

Sheryl kline
Sheryl kline
6 months ago

very nice! appreciate the ballpark withdrawal information

SCao
SCao
6 months ago

I just tried it, and it is a nice and simple tool. Thank you, Jonathan!

William L
William L
6 months ago

I’m retired. Must have a glitch as it would not allow me to enter my retirement income. Consequently no results were generated.

Jonathan Clements
Admin
Jonathan Clements
6 months ago
Reply to  William L

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.

baldscreen
baldscreen
6 months ago

Tried this morning. Doesn’t work on my iPad, which is a newer one.

baldscreen
baldscreen
6 months ago
Reply to  baldscreen

Got it to work.

Jonathan Clements
Admin
Jonathan Clements
6 months ago
Reply to  baldscreen

If for some reason the calculator doesn’t work when you first load it, try hitting your browser’s refresh button.

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