USAA’s retirement planner and financial goal-planning tools

USAA just rolled out a new set of planning tools for retirement and savings goals. Zack Gipson, USAA’s VP of Wealth and Retirement Planning, gave me beta-tester access to their server and then answered my interview questions. These tools are worth a look– especially if you don’t enjoy using retirement planners. You’re in for a pleasant surprise.

Anyone can join USAA for their financial products: checking, CDs, and mutual funds. You have to have a military affiliation to be eligible for vehicle & property insurance (“All who served honorably and their families”) but anyone can join for USAA’s financial products.

Some of these new tools have been running for months and others for only a couple of weeks. I put them through their paces, and they do a good job. (I’ve been a retirement-planning software geek for three decades, and I know what I want.) These are the easiest and most user-friendly planning tools that I’ve ever used. They’re well worth your time for the convenience of the data entry, and they’re part of a comprehensive system that grows with your USAA accounts. You can even automatically import other financial data into the planner, which lets you spend more time… planning!

Typical retirement planners are user-hostile. Most people don’t care about planners for other savings goals, either, because they’re everywhere. A few “advanced” systems might require you to have an engineering mindset or patiently research data for an hour, while others practically need an accounting degree to understand their settings. People who have used these tools for a while become accustomed to the drudgery and misery, and they don’t realize how bad it really is. I remember the 1980s planners that required you to fill out a 20-page workbook and look up numbers in a dozen tables, so having to enter a bunch of data in a website actually seems like an improvement.

Zack says that USAA noticed a useability issue with their old retirement-planning systems: people weren’t using them. Their server logs showed that fewer than 10% of their members got through the tools, and the vast majority of the membership wasn’t even starting them.

How were people doing their financial planning? Well, they really weren’t. Most were using scary urban legends rules of thumb to estimate their progress. A few would try the “Can I retire yet?” programs at various websites, but the data entry usually takes some research and it can’t be saved. A very few, extraordinarily dedicated and patient, would persevere through the research & data entry to tweak the results and try out their “What if?” scenarios. Even fewer would hire financial advisors to do it for them. It wasn’t easy to do the basic planning, let alone figure out what would make a difference.

So USAA started over.

In the last few years there’s been a quiet revolution in the Internet’s infrastructure. Instead of just building websites and storing data, companies finally have trusted tools for sharing data and mining huge databases. Web servers used to be the workhorses at making connections and passing information, but now databases are storing and crunching mountains of data to pass through those servers. A whole network of service companies has sprung up to sell their data analysis & sharing systems, now using relatively good security and great speed. The Web is still growing, but a number of standard practices and systems have also made it much easier for corporations to link their back offices together.

One of these service providers is Yodlee. They share financial data among companies. What they do is not exactly rocket science, but they’ve done it for over a decade and they’ve built up the infrastructure to do it securely & quickly. Their data-sharing services have become as commonplace as online checking and website billpay, but they’re the back-office support that enables financial data to be quickly moved among companies in a trusted manner. You’re only aware of them if you’re in the money-moving business.

Another quiet revolution has come from an unexpected source: Facebook. A few years ago, if one of your website accounts had asked you for your e-mail login & password, you would have laughed it off as a phishing attempt and run away fast. Today, however, we’ve all been trained to think “ooh, now I can find more friends import my data!” Computer users have become accustomed to giving “their” websites the logins & passwords to talk to other sites. If you’re willing to let Facebook mine your e-mail and automate your Twitter feed, then it’s just a bit more of a stretch to import data from your checking & brokerage accounts.

Now the membership benefits have just inched another notch higher, what do you get for all of that infrastructure and standardized security?

The first planner is ridiculously simple: “How much will you need to retire?” Five steps, seven simple questions about how much you’ve saved, how much you’re saving, and what other retirement income you’ll have. USAA designed this to be simple to use, and over 95% of their users completed the process. You can even use sliders for faster tinkering with the inputs, and you can hop back & forth for “What if?” questions about boosting your savings or changing your asset allocation. If you’re a calculator geek like me who prefers FinancialEngines.com or FIRECalc, then you won’t be happy here– it’s just a gateway to suck you into using the more robust planner. But if you have a friend who’s always been reluctant to crunch their numbers, then send them this link.

“How long will your savings last?” is just as easy to use. You answer questions about your age and your monthly expenses, your Social Security & pensions, your savings and how you invest. Once again the software runs the numbers against historical market performance to come up with an answer. If you’ve spent any time at all with retirement calculators then you’ll be disappointed at how little detail is required. But if you’ve never tried to figure this out before, then start here.

Now you’re ready for the detailed calculators at USAA.com/Goals. These went live just three weeks ago, and they require you to log in. (You don’t have to actually buy USAA products– you just have to open an account and register online. Anyone can do that, even if you’re not in the military.) This time your choices are “Is your retirement on track?” or “Can you retire now?”

Here’s where USAA’s infrastructure starts working for you. All of your data is saved so that you can break your sessions into five-minute increments. You can enter data for your spouse as well as your own, accommodating different ages and pensions.

Here’s where the Internet and Yodlee start working for you. Instead of laboriously entering all your savings data by hand, USAA automatically imports the data from your USAA accounts. Then it asks you if you’d like to “Add a Non-USAA Account“. Your login/password will permit USAA to have Yodlee import your asset data from your bank, the Thrift Savings Plan (!), and your other fund companies. You do this once, and next time you use the planner it’ll query Yodlee to update the data.

Once you’ve taken care of your personal info and your savings/investment data, USAA wants to know how much you’ll spend in retirement. Again us calculator geeks will automatically reach for our spreadsheets or Quicken data, and again USAA tries to offload some of that with their own “Money Manager”. USAA can analyze your USAA checking and credit-card accounts to estimate your retirement spending for you. You can let them use Yodlee to import data from your other checking accounts and credit cards. It’s not perfect because your retirement spending will have some changes from your working days, but Money Manager automates a lot of the drudgery of estimating and adding up. You can go with their MM number or enter your own.

I’m impressed by USAA’s “Help!” feature. Again, their main concern is useability. If you’re entering your data and you decide that you’re totally out of your depth, you can turn it all over to one of their wealth advisors (for a fee). They can continue the process for you over the phone while you watch what they’re doing on your own web browser. Then you can continue the “What if?” conversation. I think that most investors should learn to handle their own investments and retirement planning, but this is a great feature if you’re totally lost or intimidated by the process.

Once you’ve finished entering data and answering questions, the planner runs a Monte Carlo simulation and estimates your success. (You can read more about Monte Carlo calculators in this post.) You can tweak some of the results to answer your “What if?” questions, or you can save the results and start over. Note that all of your data has been saved, so you only need to tweak a little. If you’ve decided to manage your own investments, the planner will also suggest an asset allocation for you– from USAA funds, of course.

The planner has some flaws. One step shows the planning canard “Most people will need at least 80% of their current income to maintain their current lifestyle during retirement.” This advice is wrong, misleading, discredited by professional retirement planners, and should be deleted. Use your own budget to figure out your own retirement spending.

The planner lacks a few features. USAA tried to figure out a way to tap into our actual Social Security benefits data, but the Social Security Administration won’t cooperate. You have to estimate your own SS benefits, or USAA will estimate them for you from your current employment income. (Do yourself a favor and use the SS website benefits calculator.) USAA also can’t help you decide when to take SS, but I’m not aware of a calculator that can do that for a married couple with multiple benefit options.

The planner doesn’t explicitly show you how it’s treating some of its data. It makes its own assumptions about inflation and doesn’t let you tweak your own inflation or tax rates. However Zack says it does understand that military pensions are adjusted for inflation.

Like most retirement-planning tools, USAA’s planner has a number of design compromises. Monte Carlo simulations have their own flaws, the planner doesn’t let you vary your spending during retirement, you can’t choose between immediate or deferred annuities, you can’t adjust inflation rates, and you can’t tweak your state/local tax rates. It uses limited data about asset class historical behavior, and it runs a limited number of simulations. The asset allocation recommendations are ridiculously detailed, suggesting just “2%” of some funds and precisely “9.8%” of other funds. I also occasionally got the error message “Some accounts are not available“, so make sure the planner displays all your assets before you make any hard decisions.

However USAA hit their primary goal. This is the most usable retirement planner I’ve ever seen. It’s also one of the fastest. Over 95% of the users complete the process. Most of them are young adults aged 25-34. Over 90% of them are clients, not financial planners. If you haven’t used one before, or if you’ve given up, then get a fresh start here. When the simulation flaws and missing features start to annoy you, then step up to the more complicated planners. I’ve described mainstream planners in this post and niche planners in this post.

When you use the planner, let USAA know what you want to see. Their servers can tell if you have trouble with the software, but their staff wants to know what users really use and what they’d like to use. If you don’t want to discuss it with USAA then send me an e-mail and I’ll pass it to Zack as anonymous feedback. They have more features in the pipeline and they’re always trying out new tools.

Once you’re finished test-driving the retirement planner then take a look at USAA’s other goal planners: buying a car, saving for a home down payment, building an emergency fund, or your own personal goal.

By the way, the FTC wants me to disclose that I’ve been a USAA member for over 30 years. A few months ago USAA flew a bunch of us bloggers to San Antonio. USAA paid for my hotel room & food (good coffee, too) and gave me a gift bag (including a backsack and a cool USAA t-shirt). They introduced me to dozens of their staff, including Zack Gipson, and we’ve stayed in touch. I’ve saved thousands of dollars on their insurance over the years, and I’m even moving some of my Dad’s assets to their bank CDs for their higher interest rates. You’ll have to decide for yourself if that’s cost me my objectivity.

Related articles:
USAA.com/Goals
Problems with retirement calculators
Retirement planners and calculators
Retirement planners and calculators, part 2

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8 Comments
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