DIY Financial Planning

Calculator Sites

Two companies operate websites that are just filled with calculators for many different questions, from paying down debt to refinancing a house, to how much you need to save fore retirement and how contributing to your employer’s retirement plan will affect your take-home pay. They’re a perfect place to start looking for answers. Of course, they handle the straight mathematical questions best, and aren’t as great for complex decisions that need lots of info to answer well. Nonetheless, they should probably be your first stop for most financial questions. Both of these companies license their calculators to other business, such as banks, accountants, financial planners, insurance companies, etc. That’s how they make their money. But they are free for the general public to use.

You may notice some quirks that result from these tools being designed for businesses to generate reports for clients. You may be prompted to enter your name and contact info, which will be printed on the output. Some calculations reflect the businesses that use them. To answer the question, When should I take my pension and should I take a reduced amount to provide a spousal benefit, you may be told simply how much life insurance you would need to buy to replace that spousal benefit.

https://www.dinkytown.net/

https://calcxml.com/do/calculators-consumer Click the button for Full List of Calculators.

Income Tax Projections

TurboTax: While you can purchase the online version of TurboTax at https://turbotax.intuit.com/, the review was based on the downloaded version, which can be purchased from many retail outlets. You can purchase an actual CD or pay for a license that lets you download the software. The CD or downloaded version can usually be loaded onto more than one computer.

Beware of deals that offer exceptionally good prices; it could be a prior year edition which is useless unless you need to file a return for that year.

There may be additional costs beyond the purchase price. Some versions include only the preparation of your Federal return, and include the ability to e-file that return.  Some versions include software to prepare returns for one state. If no state is included or if you need to file returns in more than one state, you’ll have to pay an additional fee of around $40 to download each state’s software. Almost none of the TurboTax versions include e-filing for state returns, which cost around $25 per return. The e-file fees typically go up if you file after a certain date, perhaps March 1.

Quicken is a desktop app, sold as an annual subscription. You can purchase it online at https://www.quicken.com/ or from many different retailers. The reviewed version was Quicken Home & Business. The Premier edition also contains all of the tax and investment features discussed in the program. Quicken’s blog post titled How to Make Tax Time Less Taxing with Quicken gives thorough instructions, including screen shots, for all of the program’s tax features.

Flowcharts and Checklists

fpPathfinder at https://fppathfinder.com/ publishes flowcharts and checklists to help with many decisions, especially related to IRAs, employer retirement plans, Roth conversions, and Social Security. You can purchase a year’s access for $99. But you can also access these tools and download them for free from a website operated by Andy Panko, a financial planner who owns a license for these tools and posts them where anyone can download them for free. Go to https://retirementplanningeducation.com/more-free-stuff.

Specialized Calculators

Social Security

The first tool you check regarding your Social Security benefits should be the official Social Security website where you can get the most accurate estimate of your future benefits. There is one main calculator, and others for people who are receiving a pension from a job where they did not pay into Social Security. You can access all of them from ssa.gov/benefits/calculators/. Social Security will give you factual information; it is not intended as advice for what course of action you should take.

There are lots of free Social Security calculators available from a wide range of sources. Some will just estimate your benefit using your current salary, while others will recommend what claiming strategy might work best for you. Many of them are fine for getting a general idea of the options available to you. But when you need to make decisions, you want a tool that will consider all of the unique factors that could affect your benefits and the strategy that will yield the best result for you.

The best free tool for claiming strategies that I know of is opensocialsecurity.com/. It handles many of the special situations and rules, such as dependent children, working while receiving benefits, pensions from jobs not covered by Social Security, and disability.

Maximize My Social Security is the best and most complete claiming strategy tool that I tested. It costs $40 per year. It’s an online tool that says upfront that they cover all major Social Security benefit rules, and all major Social Security benefits. Go to maximizemysocialsecurity.com/.

Risk Tolerance & Asset Allocation

There are also lots of tools (questionnaires) online to figure out your risk tolerance and risk capacity. They’re often called investor questionnaires, or investor profile tools. Two that I think do a good job of asking the kinds of questions that will result in a useful answer are from Vanguard https://vgi.vg/43S9se1 and Schwab https://bit.ly/Schwab_Risk. The real URLs for those are quite long and messy, so I used the bitly shortening tool so that you don’t have to type in 100 characters if you type it in manually.

Because all of these tools ask slightly different questions, I suggest always trying at least 2 of them. Do a web search, or look on the website of the company that custodies your employer retirement plan or your personal investments. They likely all have one. You may get slightly different results with each one, and you may feel that one asks questions that are more pertinent to your situation than the other.

Pension Decisions

While Dinkytown and calcXML have calculators to help with decisions about how and when to take your pension benefits, I cannot really recommend them. Fortunately, there is another, much better option. William Baldwin, Investing Senior Contributor with Forbes developed an Excel spreadsheet, What’s My Pension Worth?, that you can download for free. You can compare the value of your pension at different claiming ages, with different spousal options, monthly benefits with taking a lump sum, and even different interest rate and mortality assumptions. I also suggest that you read the article he wrote for Forbes about using the calculator.

Financial Planning Software

Financial planning needs to pull together many of these pieces into a cohesive whole. I found two existing online tools, available to individuals, that do that.

Retirement Planner by Empower/Personal Capital: When I tested these tools around April 20th, 2023, the Empower Retirement Planner (formerly Personal Capital) was available for free at bit.ly/PersonalCapPlanner. The site will press you to agree to schedule a meeting with a financial planner. If you go directly to the Empower main webpage, you will not be able to access the retirement planner without opening an investment or IRA account. It is possible that the free version is being phased out. Ironically, Empower provides a streamlined version of Retirement Planner to people who have workplace retirement accounts with them, but at the time of testing, that version was missing some of the most valuable tools included in the free version. Syncing accounts held at other financial institutions is key for this software to work, but syncing often failed. If you have access to the Empower’s Retirement Planner through your employer, try it out. See if it does what you need and if it works reliably.

maxifiplanner.com/ is the most complete financial planning software currently available to individuals that I have found. It was developed by Dr. Laurence Kotlikoff, a respected economics professor. He is also the creator of Maximize My Social Security. It costs $109 per year, or $149 with some added features like Monte Carlo simulations that will help you evaluate the amount of risk in your plan. There is a learning curve with this software, but there is ample help available in the form of videos, topical articles, question buttons on many data entry fields or terms, a Help button on every page, and even Office Hours webinars. You can learn quite a bit about how the software works and what it can do for you on its website.

Case Study: How Do Various Tools Help with a Roth Conversion Decision?

The decision about whether to convert money from a traditional retirement account to a Roth account works well as a case study to compare how different tools handle this question. I strongly recommend that you try at least 2, and preferably more, tools before relying on their results. You will learn by comparing, in much the same way that you learn from interviewing different tradespeople about replacing a furnace or a remodeling part of your house. Some don’t ask enough questions. Some make assumptions that don’t apply in your situation. Maybe you can’t fully understand the recommendation, or it’s stated in such a way that it implies you should purchase a product (such as life insurance).

Here’s a summary of how the calculators and other tools discussed above dealt with Roth conversions.

• Dinkytown, oddly enough, has two different calculators to answer the Roth conversion question.
  • The Roth IRA Conversion Calculator gets a failing grade from me. Without clearly disclosing it , this calculator assumes that you will be paying the taxes from money outside of your retirement account. That is certainly the way you should pay the tax on a Roth conversion, but many people don’t have that kind of cash on hand. No calculator should assume this. You have to click on the “?” symbol beside the Amount to Convert field to see this assumption, and you cannot change it. The calculator also ignores other factors that should affect your decision, and the output is difficult to interpret. Nonetheless, using this calculator before you try others will help you appreciate the differences between them.
  • The Roth Conversion with Distributions Calculator asks for much more detailed input data, so you’ll get a more accurate result. You need to open up each section to access all of the input fields. The output is also easer to understand than the Roth IRA Conversion Calculator. I give this one a passing grade. It’s OK, but there is room for improvement.
• CalcXML’s offering, Should I convert to a Roth IRA?, also fails in my opinion. While some people want to convert to a Roth IRA in order to avoid Required Minimum Distributions, this calculator assumes that you will need to spend the money you are converting. It assumes that your marginal tax bracket will be the same every year during your retirement, and that the tax bracket before and after retirement is all that matters in making your decision. It does ask whether you have non-deductible contributions in the account you are converting; that is an important question. But I still find this calculator too limited.
• fpPathfinder’s flowchart, Should I Consider Doing a Roth Conversion?, is a good way to get a feel for the questions that are important for your particular situation. Will you actually need the funds you’re converting during your retirement? Do you plan to leave some of your money to charitable organizations? Now you can better evaluate calculators for this question; if it doesn’t ask about the factors you think are important, it’s not the right tool for you.
• TurboTax offers limited help on this. It can project what your income taxes will be if you convert a certain amount. But it doesn’t let you compare scenarios; you can do calculations for various scenarios, but you can’t save those or compare one scenario to another, unless you manually take screenshots and compare the numbers in those graphic images. And it cannot show you how this action will affect your income taxes in future years. For example, will it reduce your Required Minimum Distributions in the future and perhaps keep you in a lower tax bracket? If you are age 63 or older in the year you convert, will the conversion increase your income enough to make you subject to the Income-Related Monthly Adjustment Amount (IRMAA) for Medicare premiums two years down the road?
  • To learn about IRMAA, go to https://www.medicare.gov/basics/costs/medicare-costs, scroll down to the table about Part B, and click Who pays a higher Part B premium because of income? in the Premium section.
• Quicken has the same time-frame limitation as TurboTax: it can only show you the tax impacts of a Roth conversion in the current year, not any impacts on future years as already discussed for TurboTax. But you can create different scenarios and compare them side by side, including your marginal tax bracket and your average tax rate. That is extremely helpful.
• And then there’s MaxiFi, a comprehensive financial planning software that lets you compare the lifetime impact of a Roth conversion. This program recently added a built-in tool to its $149/year plan that will optimize your Roth conversions, calculating the amounts and years for Roth conversions for the best lifetime outcome, in the same way it does for Social Security benefits and start dates for distributions from retirement accounts. If you have the base plan subscription, you can still test various Roth conversion patterns by setting up “alternate profiles” to compare the lifetime impacts of any Roth conversions you may be considering, now and in the future. It will include current year tax impacts as well as impacts in the future from reduced RMDs or IRMAA for Medicare premiums, etc. If you want to see if Roth conversions will be beneficial if you plan to do Qualified Charitable Distributions, you can model that, too. You can model almost anything, but it will take time and patience. And here’s a tip: be sure to label each scenario very clearly. Once you have 3 or 4…or 6 or 10 different profiles or scenarios, it can get confusing.