More and more “do-it-yourself” guides to retirement planning are showing up on the Web. Every now and again, we try one, just to see if we can navigate it and arrive at a retirement solution comfortable for us.
Until recently, we’ve been somewhat suspicious of the bulk of these “automated financial planning programs.” They seemed to be directed more toward selling something than arriving at correct–or at least acceptable–answers. With the older programs, no matter what the input, the resulting recommendation was always for the visitor to buy whatever the program originator had to sell.
Today, a change in paradigm seems underway. While it is still true that most of these retirement planning tools are sponsored by a purveyor of a financial product that the sponsor believes will provide the answer to future retirement needs, it is also true that many of the programs provide objective, meaningful insights into the retirement planning process.
At least, they provide enough insight to convince prospective retirees of the need for planning, so they don’t enter retirement with no established goal and no plan to achieve the goal.
This vast improvement is encouraging. However, the scope of information the programs provide is less impressive in regard to longevity risks in this age of medical care improvements and ever-increasing life spans.
Insurers that have created automated retirement planning websites clearly have an interest in promoting life contingency annuities. Therefore, insurer websites tend to be better at describing longevity risk than the more general websites that focus on the financial and investment elements of the retirement process as opposed to the problems of outliving retirement funds.
A related problem is that mutual fund websites that contain retirement planning information rarely seem concerned about longevity risk. It is almost as though they subscribe to the theory that an ever increasing value of common stocks will obviate all risks of living too long.
It is difficult to pick up an insurance trade journal these days without seeing an article about the industry gearing up to provide retirement products as opposed to the accumulation products that have been the industry’s focus for the past quarter century. This increased interest in actual retirement is spawning a flurry of new product development of immediate annuities or annuities that can be used to annuitize existing deferred annuities.
Now that the Pension Protection Act of 2006 has been signed into law, a number of insurers, as well as other financial product purveyors, will surely begin gearing up programs to provide pre-retirement counseling to employees. These new programs will probably include automated retirement planning guides. Also, employers will likely make some of these programs available online so employees can undertake the retirement planning process at their leisure.
No tool that assists people to plan for retirement can be all bad, not even tools that are pre-programmed to arrive at a particular solution of buying the tool provider’s own products.
“Knowledge is power” is as valid for retirement planning as it is for life in general. The more prospective retirees are exposed to knowledge about the retirement process and the complex elements that must be managed for successful retirement, the more likely they will be to arrive at the correct course of action to achieve financial security with funds they cannot outlive.
Nevertheless, the retirement planning process is so complicated and so important that a “do-it-yourself” approach is merely the first step. It is a step toward achieving the knowledge necessary to truly plan a successful retirement.
The final planning process requires the expertise and special tools of retirement planning specialists, people who have years of experience in the process and who can help guide retirees on the proper course.
For the first time, due to the PPA of 2006, employers have the liability-free opportunity to help employees understand their retirement needs and the available products and tools. They can also provide access to the necessary products on a lower cost and more expeditious basis.
However, it will probably be quite some time before large numbers of formal, employer-sponsored, pre-retirement counseling programs will be available. In the meantime, potential retirees can use the “do-it-yourself” automated retirement planning programs available online to begin the process and to achieve an understanding of the issues and products available.