A 2002 Report

A 2002 Report

Retirement Planning Software

Project Director

Eric T. Sondergeld, ASA, CFA, MAAA Retirement Research LIMRA International 860-285-7754

esondergeld@

Project Staff

Robert S. Chamerda, FLMI LIMRA International

Matthew Drinkwater, Ph.D., ACS, FLMI LIMRA International Daniel G. Landsberg LIMRA International

Editor

Mary-Beth Selby LIMRA International

? 2003, LIMRA International, Inc. and the Society of Actuaries, in collaboration with the International Foundation for Retirement Education

005986-0103-600-0ED2RETIRE

Printed in U.S.A.

Retirement Planning Software

Contents

Page

ACKNOWLEDGMENT ......................................................................................................... 5

EXECUTIVE SUMMARY ...................................................................................................... 6

RECOMMENDATIONS ......................................................................................................... 9

Financial Service Providers......................................................................................................9 Financial Planners/Advisors.....................................................................................................9 Consumers ..............................................................................................................................10 Actuaries.................................................................................................................................11 Software Manufacturers .........................................................................................................11

INTRODUCTION................................................................................................................ 15

CHAPTER 1: EXPERIENCE USING THE SOFTWARE ......................................................... 18

Ease of Use.............................................................................................................................18 Appropriateness of Assumptions and Their Values ...............................................................21 How Clearly Results Are Presented and Explained ...............................................................21 How Variability of Results is Explained to Consumer...........................................................22

CHAPTER 2: CAPABILITIES ............................................................................................. 23

Capabilities of Consumer Programs .......................................................................................23 Capability Issues Within Professional and Consumer Programs ...........................................25 Ability to Use Own Assumptions...........................................................................................27

CHAPTER 3: RISKS .......................................................................................................... 34

Approaches to Addressing Risk .............................................................................................35 Challenges in Risk Treatment ................................................................................................40

CHAPTER 4: OUTPUT....................................................................................................... 42

Age, Longevity (Running Out of Money)..............................................................................43 Income Sources ......................................................................................................................46 Investments.............................................................................................................................48 Real Estate..............................................................................................................................49 Distribution.............................................................................................................................50 Expenses .................................................................................................................................51 Long-Term Care, Health, and Frailty .....................................................................................52

ISSUES, ADVICE AND QUESTIONS.................................................................................... 54

APPENDIX A -- METHODOLOGY .................................................................................... 57

APPENDIX B -- SOFTWARE PROGRAMS ANALYZED ...................................................... 61

APPENDIX C -- CASES ANALYZED ................................................................................. 62

ACKNOWLEDGMENT

LIMRA International, the Society of Actuaries, and the International Foundation for Retirement Education would like to acknowledge the project oversight group for their guidance on this project.

Peter W. Plumley, Chair Anna M. Rappaport, Mercer Human Resource Consulting

David Wray, Profit Sharing Council of America John E. Foley, Ball State University

Louis F. Coroso, Jr., INVESCO Retirement, Inc. Marianne V. Leedy, Invesmart

Ralph D. Marsh, Houston Police Officers Pension System Betty Meredith, Discover Learning, Inc. Richard G. Schreitmueller Robert E. Schneider, Insurance Strategies Steven C. Siegel, Society of Actuaries

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