Given the market’s upward move over the past two months, maybe you’re finally ready to take a close look at your financial future again. Who knows? Maybe things aren’t as bad as you thought during in the throes of March (and last November).
Good news if you’re in the mood for this type of exercise. Two free, online tools that can help you sort out your finances have just been released. One is ESPlanner Basic (basic.esplanner.com), a stripped-down version of a planner developed by Boston University economist Laurence Kotlikoff; the other is SimpliFi (www.simplifi.net), the first direct-to-consumer version of a planning program from a company that has been providing financial planning services to credit unions since 2006.
Based on my test-drive of each of the planners, I prefer Kotlikoff’s. Despite the “basic” in its name, it feels very advanced. Like the for-pay version, which Kotlikoff sells for $150 or $200 (based on its feature package), ESPlanner Basic lets you enter information about your salary (and expected salary trajectory), your savings and your big expenses (think housing & college education). Then it shows you a year-by-year model of your inflows/outflows, along with recommended amounts for your savings and discretionary spending. It’s a lot more detailed than your usual online planner, and it’s pretty easy to use and figure out. (My biggest problem with the program: It didn’t make it clear that, when I input projected education costs, I was supposed to enter annual expenses, not total expenses; as a result, the savings it recommended, until I figured this out, were ridiculously high.) What’s great about the program is how much it lets you fiddle with underlying assumptions. You can plug in different savings rates, retirement ages, investment returns and salary trajectories; you can even forecast a cutback in your Social Security benefits. Just re-run your plan and you can see how the different numbers shake out. The biggest limitation with ESPlanner Basic? Your profile lasts for only 24 hours. After then, you have to re-enter all your numbers–or pay up for the expensive versions, which offer greater flexibility in what you can input and track.
SimpliFi is for those who like a simpler life. It nicely organizes your life into Things You Own, Things That Grow and Things You Owe; once you put in the numbers describing your present situation, it assigns you a letter grade based on its judgment of your progress toward financial goals, along with a to-do list to get you going. While SimpliFi’s simplicity can make things easier, I took issue with what I thought were unrealistically low death ages for the couple I input; my suspicion was that their retirement would last longer than SimpliFi projected, thus requiring more money in savings. I was also puzzled by the asset allocation the program prescribed for a retirement account; based on a required return of 7.62%, SimpliFi recommended a portfolio comprising 40% money market funds and 23% bonds, with the rest in stocks. Putting aside the issue of whether that allocation is too short on stocks for someone who’s going to retire in 19 years–which I think it is–I can’t imagine how I’m supposed to get a 7.62% return with nearly two-thirds of my money in cash and fixed income.