Last fall, with his 60th birthday coming up, Roy Campfield consulted the financial-services industry's equivalent of a crystal ball. The Missoula (Mont.) dentist's goal: to find out whether his finances are in good enough shape for him to retire in five years.
Naturally, no one can predict the future. But Campfield, an avid hiker, fisherman, and marathoner, put a range of data, including his portfolio holdings and how much he'd like to spend in retirement, into sophisticated software offered by T. Rowe Price. The Baltimore company also paired Campfield with one of its advisers. The result, a solid
thumbs-up, "gives me enormous peace of mind," says Campfield. Such analytical tools are proliferating as financial-services firms vie to serve baby boomers as they near retirement.
In the past year, T. Rowe Price, Vanguard, and Merrill Lynch (MER), among others, have announced new or revamped advisory services that issue detailed forecasts of how much you're likely to earn and spend in retirement, using increasingly sophisticated technologies to keep on top of it all. Charles Schwab (SCH) plans to launch a free service this year.
Mainly for those in or near retirement, these services are not soup-to-nuts financial-planning programs. If you need tax- or estate-planning help, you may have to seek it elsewhere.
Which firm's offering is best for you depends in part on how much time you want to spend, how much handholding you need, and how much you want to pay. To help you choose, BusinessWeek (MHP) looked at five programs and identified key factors to consider.
Most of these services start with an online questionnaire. Gather statements from your bank, brokerage, and retirement accounts. Be prepared to spend 30 minutes to two hours. All automatically retrieve data on accounts you hold with them. Some can do the same for investments held elsewhere, provided you furnish account numbers and passwords.
If you're detail-oriented, go for the Fidelity Retirement Income Planner. The budget worksheet alone asks more than 40 questions, covering everything from groceries to gasoline. You can vary your estimates of future expenses, such as mortgage payments, from year to year. For faster answers, give an estimate of your total spending. T. Rowe Price and Vanguard simply ask you for a total figure. If you haven't a clue what that might be, they generally suggest you use 70% to 80% of your pre-retirement income. (The services don't always use the same assumptions about key inputs, such as how long you're likely to live. But they'll modify these on request.)
Nearly all require you to work with an adviser. What that means varies. Clients using Fidelity's Retirement Income Planner can sit down with an expert at one of 114 investor centers or communicate with call-center representatives via phone or e-mail any number of times. Do-it-yourselfers can log on to a password-protected site and work alone. (Schwab plans to offer a similar range of options.)
If you have accounts at Merrill and use its Retirement Income Service, you'll work face-to-face or on the phone with the same adviser who handles your other business. Typically, clients with advisers have at least $250,000 in investable assets.
Vanguard, T. Rowe Price, and Schwab also pair you with an adviser, but contact is more limited. Vanguard's reps spend about 45 minutes on the phone with new clients, though they'll give more time to those who need it. T. Rowe Price schedules at least two phone conversations with an adviser. Both T. Rowe Price and Vanguard take unscheduled follow-ups, but you may not always speak to the same adviser.
Aside from Merrill, the firms fit clients into one of a preset menu of portfolios, stocked mainly with mutual funds. T. Rowe Price has 10. Vanguard will soon offer nine, up from seven. The one you get usually depends on your age and responses to questions about risk.
All allow you to retain any current holdings. When recommending new investments, Vanguard and T. Rowe Price generally favor their own funds, while Fidelity, Schwab, and Merrill build portfolios with funds managed by hundreds of firms. Merrill also goes beyond mutual funds, using investments such as annuities and hedge funds.
Asset-allocation advice varies, too. Michael Cotter, a semi-retired developer from Vero Beach, Fla., sampled Vanguard's and T. Rowe Price's services. He chose Price because it had a 70% allocation to equities, vs. Vanguard's 50%, which he thought was too conservative.
Already retired? Fidelity and Merrill can track your income and spending if you route all deposits and withdrawals through them. They'll compare your spending with what your plan says it ought to be and notify you if your net worth lags expectations. Vanguard and T. Rowe Price offer free annual checkups, with advice for those having trouble. For help deciding which investments to tap for cash, just ask. T. Rowe Price will even take the amount it figures you can afford to spend each year from your investment accounts and send it to your bank account.
Tabs go from free at Fidelity and Merrill to $1,100 at Schwab. Vanguard waives its $1,000 fee for those with $250,000 or more at the firm or who transfer at least $100,000. At T. Rowe Price, the $250 fee goes away if you bring $100,000 or have $500,000 at the firm.
By Anne Tergesen