The Boulevard to Financial Independence

In the months and months we’ve been working away, we’ve had the opportunity to check out a lot of different online tools aimed at helping consumers come up with a plan, or at least a calculation, for retirement.

Boulevard R is continually refining our calculations so that they’re increasingly accurate and customized. We’re using a cost of living index by zip codes now and are fine tuning the impact of buying a home (like any independent financial advisor worth their salt would tell you, you shouldn’t count on the equity in your home as part of your nest egg because you have to live somewhere)).

In the process of coming up with our own algorithm and testing lots of other tools to see how they approach retirement planning calculations, I think the different types of planning calcs can be roughly grouped into the following categories:

1. Hi, meet our sales rep
2. Hi, we’re here to help (meet our sales rep)
3. Hi, we’re here to help (and they really are)
4. Get out the your tax returns from the last 3 years
5. You like multimedia? Have I got a site for you!
6. You like meaningless calculations? Step right up!

Let’s start at the top and explore #1 a bit more. Fidelity’s myPlan tool is a classic example of this. It gives you a quick and easy calculation, coupled with voice over and sliders. The user interface is very friendly and engaging, but the problem is that it generally comes up with an unrealistic number, because so many of the big impact assumptions are hard wired into the tool itself (like the replacement rate for income). Since you realize that this point that saving $1.2 million is a daunting proposition, talking to a Fidelity rep might be an increasingly attractive proposition. Many of the tools made by financial services companies fall into this group, principally because they’re more aligned with their own interests than those of their customers.

#2 is a more subtle variation on the first approach. It tries to help, sometimes valiantly, but in the end the goal is to provide an array of options, one of which (guess which one) is more attractive than the others. Nationwide does a nice job with this on their Retireability Check. They have a lot of good information about how to choose a financial advisor. But guess what- Nationwide is not in the business of generating leads for non-associated financial advisors.

Financial Engines is a good example of #3. Tools built by a Nobel Prize winning economist. They really set out to create tools to help consumers make good investment decisions. The problem is that most people don’t what to use them. They’re not particularly engaging and you’re totally isolated from anyone else who uses the tool. No collective wisdom, no tips or advice, just modeling with a pretty bland interface. When it comes to picking good mutual funds, they make it pretty easy, though it’d be interested to see how the top mutual funds perform against index funds.

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