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New Fidelity service offers broad help for retirement money

Updated: May 3, 2013 12:14PM



Originally published: June 24, 2004

Until now, the financial services industry has been focused on gathering assets -- educating, advising and selling the general public on the concept that they have to save and invest for retirement. But now as the 76 million members of the baby boom generation start to face the reality of retirement, the issue has changed.

The new focus is on the realities of living in retirement. How much money do you need? How should it be invested? How much can you withdraw without running out of money before you run out of time?

I’ve written before about the concept of “Monte Carlo” modeling of retirement investment-and-withdrawal scenarios. “Monte Carlo” has nothing to do with gambling. It’s the science of modeling multiple variables to come up with a range of probable outcomes. It takes sophisticated computer programming and a vast database of historical information to make a reliable probability estimate. Plus it requires input about your personal financial situation and risk tolerance.

Beyond guesstimates

This is the world beyond “averages” and “guesstimates,” which can not only be misleading, but result in disastrous consequences.

Financial planners have always had some tools to help individuals make those decisions. Vanguard and T. Rowe Price have offered such a service for several years. Theirs costs $500 for the initial program, and a yearly update. You can test those services online at their Web sites, though the real benefit comes when you sign up for the plan and work with an adviser.

But now, Fidelity Investments has scored with a major new concept aimed directly at the pre-retirement market, as well as those already in retirement. In fact, Fidelity asserts that it will target retirement planning with the same intensity it has focused on the 401(k) and IRA market.

The program is called Fidelity Retirement Income Advantage, and it’s being rolled out to Fidelity customers right now. [Full disclosure: I’ve spoken at Fidelity events, though I learned of this program at the same press conference as the rest of the media.] The new Fidelity service is larger than just investment and income planning. It will provide the framework for planning, investing, withdrawing and reassessing all your retirement assets, from Social Security and pension checks to IRA rollover assets and other savings, whether invested with Fidelity or elsewhere.

It’s an ambitious offering, certain to be copied by others. Creating this kind of service requires not only investment management strength, but technology and customer service. It’s free for those who sign up before year-end; there is a nominal cost -- waived for assets over $100,000 -- if you sign up next year. You can get more information at Fidelity.com or by calling (800) 903-6563.

Here’s what the Fidelity Retirement Income Advantage service offers:

* An overall retirement plan. That’s the starting point. A planning tool guides individuals to deal with risks ranging from inflation and rising health care costs to issues like assessing risk in investments and concerns about outliving assets. That all comes together in the two critical parts of the plan: the investment allocation and the withdrawal scenario.

* Income management account. Once the plan is created, it can be tracked online -- not only to view investment returns, but to see whether you’re withdrawing too much money based on your plan. Fidelity advisers will help you determine required minimum withdrawals from IRAs, and advise on which accounts should be drawn down first. Using Fidelity’s online bill pay service, you can have pension and Social Security checks direct-deposited to your account. And you can pay your bills from that account, or send yourself a planned monthly “paycheck” distribution from your retirement funds. Plus, you can sign up for e-mail or telephone alerts if you’re deviating from the plan.

* Investment advice. Fidelity doesn’t use the word “advice” in its service, and I’m assuming that it’s a term fraught with regulation. But, by any other name, this is what investors are looking for -- and it’s what you get: help creating a target investment asset mix, appropriate for your age, goals, and risk tolerance.

Ask a boomer about his or her financial plan for retirement, and you’re likely to get a blank stare. It’s something we don’t want to think about because we don’t know how to think about it. Now you can find the answers easily. And that’s The Savage Truth.

Terry Savage is a registered investment adviser, and appears weekly on WMAQ-Channel 5’s 4:30 p.m. newscast. Distributed by Creators Syndicate.



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