A Savings Checkup For a Healthy Future

When you're saving for retirement, your children's college fund, and all your other hopes and dreams, it's natural to worry a little about whether you're on track. And there's no shortage of people waiting to give you advice.

For do-it-yourself fund investors who prefer to handle their own money checkups, the major no-load shops offer a wide range of financial planning tools. Depending on how much hand-holding you want, you can plug your data into online questionnaires for free or schedule an appointment with an in-house financial planner who will assess your progress for a fee and help you figure out what changes you should make to meet your goals.

The Vanguard Group, which has been offering investment advice to clients for about 10 years, recently rolled out a new set of tools aimed at helping retirees and accumulators figure out where they stand. This "financial physical" evaluates your existing portfolio's asset allocation and tax efficiency and provides investment recommendations. Clients answer questionnaires on paper or online and get a 20-page report and a phone consultation with a certified financial planner within two weeks.

The process incorporates an annual checkup, which encourages investors to stay on track; rebalance appropriately; and factor in life changes, such as the sale or purchase of a home, an inheritance or a change in marital status.

Two-thirds of those who use the program are in or nearing retirement. The financial plans are free for Vanguard clients with balances of $250,000 or more and for new clients who bring in at least $100,000; for anyone below those thresholds, there is a flat fee of $1,000.

T. Rowe Price offers a combination of fee-based advisory services and free online tools, including a calculator that helps retiring investors figure how fast they can spend their nest egg.

For those in need of more guidance, there's the firm's Retirement Income Manager service, in which a financial planner presents a model investment portfolio and dollar amount you can afford to spend every month. There's a one-time fee of $500, which is waived for clients with sufficient asset levels. Annual reviews are provided to investors with at least $250,000.

For investors who are a bit further from retirement, T. Rowe offers an "investment checkup" for $250, which uses a questionnaire to gather information about investments, risk tolerance and goals. The report includes analysis of the investor's strategy and holdings, a comparison of his portfolio against the firm's recommended asset allocation, and suggestions for how to adjust it.

At Fidelity Investments, all the retirement planning tools are free, and you don't have to be a customer to use them, though you may not be able to use all of them online. Fidelity Retirement Income Advantage, aimed at people who are about 10 years from retirement, is among the best known, said spokeswoman Jenny Engle. Launched in 2004, it's designed to create an income plan to make sure people won't outlive their money, and it helps investors see how their financial picture will change under different scenarios -- such as the timing of the sale of a house or when they start taking Social Security.

For younger investors, Fidelity offers the Retirement Quick Check, which is a way to see if you're on track to have enough saved at retirement. Yet another service, Portfolio Review, evaluates asset allocation based on an online questionnaire.

When planning for retirement, "there are so many variables," Engle said. "People think they're going to spend less, and what actually happens when they first retire is they spend more; they're traveling, visiting grandchildren. Then they go through a down period where they are spending less, and then the third phase is their health-care expenses go way up."

For this reason, Fidelity recommends that investors plan to replace 85 percent of their pre-retirement income; a study the firm conducts every few months to measure retirement readiness shows households are currently on track to replace about 56 percent, on average.

Of course, nothing compares with sitting down and talking with an independent financial planner who is working for no one but you. How much this costs depends on whom you go to and what the fees are based on. A fee-only planner will have fewer conflicts than one who earns a commission for selling you certain products. Some, notably those in the Garrett Planning Network, charge hourly rates, so you buy only as much advice as you need. Others may charge a retainer, or a percentage of assets under management.

Though they're far from comprehensive, the tools offered by Vanguard, Fidelity and T. Rowe can be a great first step toward figuring out what you need to save, said Peggy Cabaniss, owner of HC Financial Advisors Inc. in Lafayette, Calif., and chairman of the National Association of Personal Financial Advisors. Clients who have used them arrive with greater knowledge about diversification, asset allocation and the various investment vehicles available, which frees the planner to focus on other issues, such as the adequacy of insurance coverage and tax and estate planning.

"A computer can tell you if your asset allocation is okay, but so much of finance is emotional and psychological," she said. "That's one of the things you can get one-on-one with a person who sees your total picture. You can release those anxieties and worries, and prioritize them. I know you won't get that kind of help from a computer program, and I'm not sure how much you can get it talking to someone on the phone. People forget the emotional side of money."