Can you go online and truly plan your retirement?
No, not every single detail. But you will find some very helpful tools that allow you to outline your financial future, whether you plan on retiring 10, 20 or 30 years from now.
What's available today is far more sophisticated than a few years ago. The first offerings online were simple calculators and they somehow always indicated that you never saved enough money.
Being browbeaten is not much fun.
Or especially educational.
Now, you can tap into entire financial planning systems that allow you to think through all the "What if I do this?" questions you have to face in planning far ahead. You can run your numbers through model portfolios and come up with your probable chances of getting from here to there.
Go over what you find carefully, consumer advocates advise. What you get could be great advice, but you should take into account who is giving it. Is it from someone who wants to sell you investments? Does it consider real investment performance or just predict that your assets will go up and up forever? Be as cautious, they say, with online tools as you would be with any financial adviser.
That said, it's valuable to take a little stroll through interactive financial planning tools such as Morningstar's ClearFuture, available at morningstar.com, or Financial Engines, at financialengines.com. These can be set up to provide a personal plan for the long or short term. Others give you a blueprint for college savings or taking distributions from an IRA. What's more, it's fairly simple online to find fast answers to complex planning questions such as the impact of taxes on investments and what amount of insurance you might need.
Let's say you want to figure out whether you might outlive your retirement income, you can go to T. Rowe Price's Retirement Income Calculator (free to all users at http://www3.troweprice.com/retincome/RIC/).
You fill in the broad outlines of your portfolio what percent stocks, bonds and cash and learn what sort of income it can be expected to produce. Then, you get to try out some other hypothetical portfolios and see if a different mix of assets works better.
The availability of online planning tools has spread, from its beginnings on financial and media sites all the way to the office. Employers, in particular, seem eager to offer them as an inexpensive way to offer help to workers who must handle their own retirement savings.
Many mutual fund companies offer them, free either to customers or to site visitors.
And you can get some basic answers on such finance-oriented sites as www.calcbuilder.com or www.msnbc.com.
At work, millions of people already have access to online financial planning tools as an employee benefit that goes along with their 401(k)-retirement savings plan.
This trend may well spread. At the moment, 401(k) savers can't get specific investment advice from their plan providers, under the terms of federal pension law. However, the Senate is soon expected to take up a House-passed bill, which would change that. If that happens, much of the new advice would probably be delivered online.
While online financial plans are quick and easy to use, they are never going to be as personal as the plan you'd get in-person from a real, live certified financial planner.
And you have to "read with some degree of skepticism," said Nan Mead of the National Endowment for Financial Education. "A lot of the sites are self-promoting."
There's one other issue to consider, before you go racing off electronically: privacy.
As soon as you figure out a financial plan, someone's ad will likely pop up on your screen offering to move your money around for you.
It's just too tempting for a financial institution once it knows what you have to keep its hands off that information.
So, check the privacy policy before you take the free online financial plan.
"With a financial adviser, you can reach some sort of personal agreement about how to protect the information you give and most independent advisers will guard your information religiously," noted Barbara Roper, director of investor protection for the Consumer Federation of America. "When you send the same information out to cyberspace, it is for sale to the highest bidder."
How good is the advice you get online? The best tools have been created by people who don't have a stake in the choices you make.
Financial Engines was founded by Nobel prize-winning economist William Sharpe, who was one of the developers of Modern Portfolio Theory.
Neither Morningstar nor DirectAdvice, a major player in online planning, sell investments. Morningstar's main business is in analyzing mutual funds, while DirectAdvice consulted certified financial planners across the country to design its system. Both companies, however, partner with companies that do sell investments. Several of Morningstar's major planning tools, for example, are offered free by T. Rowe Price.
You may not have heard of DirectAdvice, but it is the company whose tools are re-branded and offered to customers of Prudential Financial, Mellon Financial and Wachovia.
As for Financial Engines, its service is available to some 3 million employees at 800 companies nationwide.
If you're not one of those who gets the tools as an employee benefit, you can tap in directly to DirectAdvice.com for a fee of $75, Financial Engines for multiple account advice for $39.95 per quarter or Morningstar's collection of tools for $11.95 a month.
What's best about good, basic online tools is that they're spreading education about saving and investing, especially to people who can't afford a planner.
These offer help to "people who don't have a lot of money to invest, who are trying to build a nest egg reach a plateau where they need to learn more," Mead said. "They may not be getting financial information through sources that the rest of us take for granted, such as financial institutions. Otherwise, they may miss out."
Harriet Johnson Brackey writes for the Miami Herald. E-mail her at hbrackey@herald.com.
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