George Hager

Tuesday, September 28, 1999, at 11 a.m.

Dazzled by the how well his IRA had done in the stock market boom of the last few years, Washington Post staff writer George Hager wondered whether his newfound riches might be moving up the day when he could retire to a beach somewhere and write the Great American Novel.

Alas, when he ran his IRA and the rest of his finances through three Web-based retirement planners and three software programs that offer even more sophisticated retirement planning advice, he found that he'll have to keep working — for a long time. And that was before the recent nosedive in the Dow.

Hager will discuss his experiences, talk about the pros and cons of online and software retirement advisors and discuss which planners work the best.

George Hager: Good morning! I'm George Hager, a staff writer in the Post's Business section, and I'll be live online for the next hour or so to take your questions about the reviews I wrote in Sunday's paper about retirement planning software and websites. In case you didn't see the piece, I reviewed three pieces of software (Quicken 2000, ESPlanner and T. Rowe Price's Retirement Planning Analyzer), plus three of the Web's zillion retirement planning websites. I was looking for the best and easiest to use retirement planner.

One caution: I'm not an investment advisor or a retirement planner myself, so if I waffle on questions about which stocks to pick or how to plan your retirement, that's why. But if you'd like to take advantage of whatever wisdom I gained in the hours and hours I spent testing software and trying out websites, please go right ahead with your questions.

Bel Alton, MD: How do you feel about S&P 500 Index mutual funds? Is that one of the more stable investments one can make in the market? I'm 35 with $250,000 in an S&P 500 fund, and about $40,000 in high-risk stock funds. Does this sound like a decent plan for retirement, along with the max 401K contribution I can make? Thanks for the advice.

George Hager: Remember that I'm not an investment advisor or a particularly successful stock picker. That said, your investment choices mirror mine -- I have two IRAs, one in an S&P 500 index fund, and the other in an aggressive (read risky), growth-oriented fund. Both have done quite well in the market boom of the last few years, and since I don't plan on retiring for at least another 10-15 years, I'm happy to ride out the inevitable waves. On the other hand, I haven't had the nerve to check the fund's new values since the market's swan dive last week.

washingtonpost.com: How long does it take to come up with a good retirement plan using either software or a website?

George Hager: Quicken 2000 says it should take you only about a half hour to go through their planning exercise. They must be talking about people who have already entered all their financial data -- checking account, IRAs, other savings, and so on -- in Quicken's other modules. It took me about two hours to do a quick and dirty estimate with Quicken. I'd allow double or triple that much time to do a really good job and play with all the what-if possibilities (lower or higher inflation, different investment returns, etc.).

washington, DC: What is the URL for the Optimal Retirement Planner Web site that you mentioned in your article on Sunday?

George Hager: Take a look at dp-net.com/orp/index.html

This was one of the most interesting and seemingly thorough calculators I found on the Web; like other Web-based calculators, though, it didn't save my data, which meant that every time I wanted to use it, I'd have to enter all my numbers all over again -- a major chore.

For that reason, I gave the Quicken.com website my highest rating; it save my data for me, so I could easily go back and change things, add new stuff and fiddle with what-if scenarios.

chevy chase, md.: sorry to be such an anti-technology crank, but why does anyone need software of any kind to figure out his retirement? how about the ability to take a lump of cash -which you'll presumably have accumulated-, divide by the number of years you expect to live and see if the result is sufficient. if it isn't, go work the counter at a 7-Eleven. seriously, does software enhance this process in some mysterious way?

George Hager: I wondered the same thing myself, figuring that some of this might just be tech overkill. As I explored the calculators, though, I realized this can be a pretty complicated exercise. For one thing, you may have several different accounts, each invested in different instruments, with different rates of return. Assume you're pulling out a certain amount of money each year; the balance is accruing earnings/interest/whatever in the meantime. The calculators quickly figure how much you'll have left after inflation, taxes and major expenses you're likely to have, such as buying a new car or painting your house.

I thought the real value of these calculators was to allow me to try out various what-if scenarios and get instant feedback about how more or less savings, higher or lower inflation, etc., would affect my plans.

And, OK, I'll admit it -- I enjoy fiddling with programs like this.

Dupont Circle, DC: Dear Mr. Hager,

I just graduated from college and am now working in Dc as a computer programmer. I have a retirement plan at work, but am not really sure what it is doing or how much I should be investing at 21. Since I am a programmer, I have a lot of access and time spent on the web and running numbers through a web based server is an attractive option for me? Where do I go and what should I do?

George Hager: You're probably more expert than I am on the capabilities of Web-based programs, but what I found there, while impressive, was clearly inferior to the software I tested.

Each of the three pieces of software I tried was orders of magnitude more powerful and complex than their Web counterparts -- basically, they allowed me to enter more information, devise more complicated (and therefore realistic) scenarios and get more thorough answers.

That said, all the stuff I tried on the Web was absolutely free, a big advantage. And for a first crack at a retirement plan, the calculators at Quicken.com or SmartMoney.com will give you a very good sense about how much you should be saving.

washingtonpost.com: Half an hour left with George Hager. Keep your questions coming!

Fairfax, VA: How much money do you need when you retire? I hear you need about $500,000.

George Hager: Aha -- good question. What I found out after trying these calculators was that there's no easy answer. It all depends on your situation -- Do you own your own home? Will it be paid off when you retire? how much do you expect from Social Security or a private pension? How much will it really cost you to live after you retire?

The calculators get answers to all these questions and then work out a plan for you. You might want to take a look at the single most interesting gizmo I found in doing these reviews -- the simple calculator at the SmartMoney.com site. I plugged in an imaginary $500,000 portfolio, assumed I planned to retire tomorrow and then live another 50 years. Inflation made a huge difference in the answers I got. At 3 percent -- about the average of the last 70 years -- I could pull out almost $22,000 a year in inflation-adjusted dollars for as long as I planned to live. But if inflation went up to 6 percent -- not unheard of during certain periods in the 1970s and 1980s -- my annual draw would plummet to $12,500, which would obviously require a significant lifestyle change.

Vienna, VA: The planners that I have seen ask you basic - how much tax-deferred, non tax-deferred $$$s do you have etc. A lot of the answers are "it depends" - for company pension plans it depends on how and when I start taking the money out. Did you find any planners that easily let you change these in the what-if scenarios? e.g. different for different pension plans- social security etc. rather than one total number?

George Hager: Absolutely. The best what-if calculator I found was the one in the Quicken 2000 software. Once you've entered all your info, you can change just about any of it, including several things at once, and see what that does to your plan.

Manassas, VA: Most of the literature, web sites etc. talk about how much to save. Well I'm just about at the end of my saving years - I need advice on the best way to take the money out and start using it - did you find good advice in this area?

George Hager: An excellent question, and one I'll confess I didn't focus on while doing my reviews.

Based on what I saw, though, you might want to take a look at ESPlanner, a powerful and complex program developed by three economists. Once I entered all my data, this program churned out no fewer than 28 reports, most of them detailed spreadsheets that showed how much I'd have in tax-deferred and non-deferred savings, how much I was pulling out, what my taxes would be, and so on (and on and on and on). I doubt there's any question I couldn't have answered by playing with ESPlanner, presuming I'd taken the time to work through it.

DC: Can you provide a link to the article in Sunday's paper?

Thanx!

George Hager: My tech advisors tell me the link goes on forever, and they suggested an easier way to get there: Go to WashingtonPost.com, invoke the search feature, put my name (George Hager) in the box, and the article will come up for 14 days after it was published. Since I haven't written anything since Sunday, it should come up on top. If not, the headline you'll recognize is: "Want a Shock? Do the Numbers Online"

washingtonpost.com: You can read the software portion of George's review here or the Web site portion here.

Va Beach Va: Do you have any experience or opinion on using Microsoft Money 2000 for retirement planning?

George Hager: Good question. But due to a lack of time, I did NOT try Microsoft Money 2000 for this review, so I regret to say I can't tell you anything about it. Next time.

In the meantime, though, let me use this as an opportunity to rate the programs I did try:

Quicken 2000. For your $49.95, you get a full-featured program that allows you to perform several functions -- manage your investments, keep your checkbook, etc. -- in addition to retirement planning, which is a sidelight. I own this program myself, and while I sometimes find it cranky and non-intuitive (my personal rule is that any software that requires you to consult the manual was badly designed), I have come to terms with it over the years and find it quite useful.

ESPlanner. Here, your $49.95 buys you a dedicated retirement planner that, while powerful, is not as glitzy and user-friendly as its competitors. It does none of the other things that Quicken 2000 does, but for the serious future retiree, however, this seemed to be the most powerful engine you could get.

T. Rowe Price Retirement Planning Analyzer. A mere $9.95 gets you a reasonably powerful, quite user-friendly retirement planner. I enjoyed using this program more than either of its competitors. On the other hand, it gave me none of the extra functions Quicken 2000 did, and it did not seem to have the depth that ESPlanner did.

washingtonpost.com: Retirement planning websites always want to know how long I'll live. I'd like to think I'll live to 110, but I want to base my plan on a realistic number. How important is that number, and how do I get a good estimate?

George Hager: This is a crucial number, since you don't want to outlive your money. On the other hand, how the heck do you know how long you'll live. T. Rowe Price's software program quotes a Fairfax, VA, financial planner on this subject, advising most of us to pick age 90, since only 10 percent of people live longer.

If you want a fairly detailed personal estimate, though, head to Microsoft's Moneycentral site (moneycentral.msn.com/retire/home.asp). The age estimator there asks you numerous questions and calculates your life expectancy.

Washington, DC: Are there any mega-websites you'd recommend that link to all the calculators and planners and other retirement info on the 'Net?

George Hager: Check out retireplan.miningco.com

Links to scores of calculators, advice, and so on. Caution, though: Many of the links listed here are defunct.

George Hager: That's all the time we've got! Thanks for your questions, and keep watching the Post's Business section. Chances are we'll revisit this topic in the future.