"When Vanguard's Retirement Income Calculator Stopped Making Sense"

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Taylor Larimore
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"When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by Taylor Larimore » Fri Aug 09, 2019 6:40 pm

Bogleheads:

Morningstar's John Rekenthaler, has written a useful article about Vanguard's Retirement Income Calculator. These are excerpts:
"The president of the American Finance Association, Dr. David Hirshleifer, noticed something peculiar about Vanguard's Retirement Income Calculator. By its reckoning, a hypothetical 55-year-old investor who saved at the tool's highest possible rate, earning the highest possible return, holding the highest possible current retirement assets, and willing to settle for the lowest possible income-replacement rate … would fail."

"Financial-services firms sometimes exaggerate their customers' retirement needs. Perhaps Vanguard has done the same."

"a calculator that fails the apparent best case looks pretty silly."

"Even calculators that run simulations show midpoint results that imply more inevitability than exists."

"To reach the targeted level of retirement income, the hypothetical investor must work until age 81, all the while receiving her full salary. Such an event is more likely to occur than pigs flying."

"The moral: Retirement-income calculators serve middle-tier workers well. Their settings are calibrated accordingly, and their rules of thumb, such as the appropriate range of replacement rates, are sound. They are unsuited for those on the outside, though."
When Vanguard's Retirement Income Calculator Stopped Making Sense

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The data show us that only about 5 percent of the managers will outperform the market over an investment lifetime."
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mhalley
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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by mhalley » Fri Aug 09, 2019 7:40 pm

Another example of Vanguard being behind in technology on its web site.
. The problem is the limits. The calculator's cap on current assets is too low...

I can see why Vanguard would wish to set a relatively low limit on current assets. Permit the slider to show $10 million, and there's the user who may immediately quit, deciding that the tool wasn't made for people like him. So, I can understand how the decision might have been made. But it was a poor one, because a calculator that fails the apparent best case looks pretty silly.
Solutionm have the slider to 2 mill, but allow typing in larger numbers. Or a “have more than 2 mill? Click here for our high net worth/high income calculator”

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by RadAudit » Sat Aug 10, 2019 8:18 am

Taylor Larimore wrote:
Fri Aug 09, 2019 6:40 pm
"The moral: Retirement-income calculators serve middle-tier workers well. Their settings are calibrated accordingly, and their rules of thumb, such as the appropriate range of replacement rates, are sound. They are unsuited for those on the outside, though."
+1.

Thanks for highlighting the key point in the article. Hopefully, for some BHs and others outside the middle tier, there are other calculators or approaches available.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by milktoast » Sat Aug 10, 2019 10:48 am

I lost access to their other calculator when I dropped from PAS.

That calculator was capable of dealing with arbitrary inputs.

I kind of miss it.

Any links to more flexible one online?

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by Sandi_k » Sat Aug 10, 2019 1:19 pm

milktoast wrote:
Sat Aug 10, 2019 10:48 am
I lost access to their other calculator when I dropped from PAS.

That calculator was capable of dealing with arbitrary inputs.

I kind of miss it.

Any links to more flexible one online?
I like this one:

https://www.newretirement.com/

It allows you to save inputs so you can come back and refine later. Also allows for multiple inputs, such as pension, IRAs, house sale, and one-time events (such as possible inheritance).

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by utvolfan » Sat Aug 10, 2019 2:00 pm

Sandi_k,
Regarding the retirement calculator you recommended, I went to the site and played around with the free one (no sign up required) and it continually suggests trying the new retirement planner that is free but more informative, but requires making an account. Have you used this free more in depth one without consequences for signing up (unwanted emails, phone calls, etc.)? Would like some feedback before going further with the sign up.
I have used FireCalc, cFiresim, and one by Todd Tressidor (can't remember if it is the Ultimate or Flexible Retirement planner) and I like those but am always looking for another take on things.
I like this one:

https://www.newretirement.com/

It allows you to save inputs so you can come back and refine later. Also allows for multiple inputs, such as pension, IRAs, house sale, and one-time events (such as possible inheritance).

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by aspirit » Sat Aug 10, 2019 2:13 pm

I support your VWR(variablewithdrawalrate) hypothesis that makes so much sense, anything else is foolhardy imho.

Say one has a withdrawal rate of inflation + 1% starting at 70yrs old.
Why take it if you do not need it!
An RMD?
Redistribute it if necessary, but to spend just "because" does not compute.
I'd suspect savers save instinctively. :oops: .

There's academia's/professionals theoretical scientific algorithms and then theres real life.
Remember LTCM? The odds its algorithmic approach would fail were( iirc ) 1 x 10 to the 24th power.
Your inputs always insightful TL!
Good Luck!
Time & tides wait for no one. A man has to know his limitations. | "Give me control of a nation's money and I care not who makes it's laws" | — Mayer Amschel Bauer Rothschild ~

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by Sandi_k » Sat Aug 10, 2019 6:05 pm

Yes, I signed up with an account. No problems. Maybe 2 emails in the past year?
utvolfan wrote:
Sat Aug 10, 2019 2:00 pm
Sandi_k,
Regarding the retirement calculator you recommended, I went to the site and played around with the free one (no sign up required) and it continually suggests trying the new retirement planner that is free but more informative, but requires making an account. Have you used this free more in depth one without consequences for signing up (unwanted emails, phone calls, etc.)? Would like some feedback before going further with the sign up.
I have used FireCalc, cFiresim, and one by Todd Tressidor (can't remember if it is the Ultimate or Flexible Retirement planner) and I like those but am always looking for another take on things.
I like this one:

https://www.newretirement.com/

It allows you to save inputs so you can come back and refine later. Also allows for multiple inputs, such as pension, IRAs, house sale, and one-time events (such as possible inheritance).

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Kenkat
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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by Kenkat » Sat Aug 10, 2019 6:28 pm

Vanguard Management: Hey, we’ve gotten some strange reports about the Retirement Income calculator.
Vanguard IT: Oh, really?
Vanguard Management: Yeah, it’s giving really crazy results. You guys tested it, right?
Vanguard IT: Tested? Oh, ummm...hmmm...wait, was that in the project plan?

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oldzey
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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by oldzey » Sat Aug 10, 2019 8:19 pm

Here is a link to a retirement calculator by T. Rowe Price that was recommended to me years ago (requires registration):

https://www3.troweprice.com/ric/ricweb/public/ric.do
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

utvolfan
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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by utvolfan » Sun Aug 11, 2019 12:30 pm

Here is a link to a retirement calculator by T. Rowe Price that was recommended to me years ago (requires registration):

https://www3.troweprice.com/ric/ricweb/public/ric.do
Thanks for this link! I had heard of it but never realized you could use it without being a customer. Been playing around with the numbers this afternoon :happy

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by oldzey » Mon Aug 12, 2019 2:58 pm

utvolfan wrote:
Sun Aug 11, 2019 12:30 pm
Here is a link to a retirement calculator by T. Rowe Price that was recommended to me years ago (requires registration):

https://www3.troweprice.com/ric/ricweb/public/ric.do
Thanks for this link! I had heard of it but never realized you could use it without being a customer. Been playing around with the numbers this afternoon :happy
My pleasure!

I like that it will save the numbers you input for the next time you log in.
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by willthrill81 » Mon Aug 12, 2019 3:58 pm

After having used many online calculators, I've found that a simple time value of money app on my phone is probably about as valid as any of them. Rather than doing complex and potentially flawed Monte Carlo analysis, I just use a historically conservative return estimate of 4-5%. And this same approach can be used for determining how much to withdraw in a given year as well.

If you have multiple contributions/withdrawals coming in at different points in time, with different rates of return, etc., this can be done in Excel also.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by RadAudit » Mon Aug 12, 2019 4:13 pm

willthrill81 wrote:
Mon Aug 12, 2019 3:58 pm
I've found that a simple time value of money app on my phone
Ah, the good old HP12C. Time to dust it off for one more time.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by willthrill81 » Mon Aug 12, 2019 4:14 pm

RadAudit wrote:
Mon Aug 12, 2019 4:13 pm
willthrill81 wrote:
Mon Aug 12, 2019 3:58 pm
I've found that a simple time value of money app on my phone
Ah, the good old HP12C. Time to dust it off for one more time.
I cut my teeth on the BAII-Plus. It still works too.

Image
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by oldzey » Mon Aug 12, 2019 5:52 pm

RadAudit wrote:
Mon Aug 12, 2019 4:13 pm
willthrill81 wrote:
Mon Aug 12, 2019 3:58 pm
I've found that a simple time value of money app on my phone
Ah, the good old HP12C. Time to dust it off for one more time.
42 years ago, I asked for the HP-01 Calculator watch for my 10th birthday.

Instead, I got this bad boy:

Image

Needless to say, I was still happy as it helped greatly with my 4th grade math homework. 8-)
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

columbia
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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by columbia » Mon Aug 12, 2019 6:01 pm

Hand me down from my father in 1985:

Image

It died around 1988. :(

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by mariezzz » Mon Aug 12, 2019 8:18 pm

oldzey wrote:
Mon Aug 12, 2019 5:52 pm
RadAudit wrote:
Mon Aug 12, 2019 4:13 pm
willthrill81 wrote:
Mon Aug 12, 2019 3:58 pm
I've found that a simple time value of money app on my phone
Ah, the good old HP12C. Time to dust it off for one more time.
42 years ago, I asked for the HP-01 Calculator watch for my 10th birthday.

Instead, I got this bad boy:

Image

Needless to say, I was still happy as it helped greatly with my 4th grade math homework. 8-)
$21.96 in 1977. $92.82 today.

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by Sandi_k » Mon Aug 12, 2019 11:55 pm

columbia wrote:
Mon Aug 12, 2019 6:01 pm
Hand me down from my father in 1985:

Image

It died around 1988. :(
I got that one for my high school trig homework.In 1982. :D

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by bayview » Tue Aug 13, 2019 4:30 am

I had to use a sliderule. :( :( :oops:
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by NearlyRetired » Tue Aug 13, 2019 8:13 am

bayview wrote:
Tue Aug 13, 2019 4:30 am
I had to use a sliderule. :( :( :oops:
It was log tables for me :D
To err is to be human, to really mess up, use a computer

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by willthrill81 » Tue Aug 13, 2019 10:23 am

bayview wrote:
Tue Aug 13, 2019 4:30 am
I had to use a sliderule. :( :( :oops:
Slide rules were good enough to put a dozen men on the moon. And if such 'crude' methods were good enough to do that, perhaps relatively simple retirement planning methods are good enough too. Complicated retirement calculators may have 'black box' components, limits (such as the OP), and assumptions that are outright wrong or just undesirable.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by StandingRock » Tue Aug 13, 2019 10:32 am

IIRC, it seems like with most of these things that the range of assumptions fall within a narrow, traditional band. They don't account for people who may be making well into six figures per year but stick to a 30k budget. I don't mess with them any more.

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Re: "When Vanguard's Retirement Income Calculator Stopped Making Sense"

Post by oldzey » Tue Aug 13, 2019 3:15 pm

They just don't make 'em like they used to...

Image

Denon Nixie Tube Calculator
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

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