Do-It-Yourself Retirement: How Online Programs Can Help

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.