The other day I was having a conversation with a friend of mine and the topic turned towards retirement.
I could tell, my friend was concerned about not having enough saved up for his retirement. Yet, he was doing everything right – from contributing towards his 401K, to funding his IRA and best of all, he knew the merits of indexing.
But there was a problem. He didn’t share my enthusiasm when it came to investing or about personal finance in general. “I don’t want to constantly monitor my investments”! His words!
Not that he didn’t invest, he did, but his investing technique was… rather chaotic!
Unfortunately, he is not alone. Millions of Americans are just like him – investing without discipline. I would’ve suggested going to a financial advisor, but then finding a good one is like finding a good used car salesman! Loaded funds, recurring fees, conflict of interests… Might do him more harm than good.
What then? Books? He would rather spend his afternoons mowing his lawn than read a book!
I suggested the Five Minute Retirement Plan. Here’s why:
- It is free
- Literally takes five minutes
- Enter your contribution amount and age, get a full blown asset allocation spreadsheet scientifically computed
- Simply follow the allocation
- Sleep easy at night!
Asset allocation doesn’t stay constant. It varies with age. The older you get, the more conservative your portfolio should be. Five Minute Retirement Plan is an asset allocation tool based on Modern Portfolio Theory. (MPT’s creators won a Nobel prize for this theory!) This tool builds and recommends one out of twenty different portfolios based upon your age, risk tolerance and the amount of time the assets are held in your portfolio.
You can also see a projection of the portfolio growth, and the amount of money you can withdraw safely each year after retirement.
Why Do I Recommend This Tool?
No, I’m not getting paid for this review and that’s probably why this wonderful yet free tool remains unknown. It not only recommends an appropriate asset allocation but also suggest which funds to buy. And I have to say, the funds recommended are well chosen. Low cost funds with good liquidity.
All you have to do is simply follow the recommendation!
What’s the catch?
No limited trials, no credit card required, you don’t even have to register! The funds recommended are not affiliate links either. There is no catch, none I can see other than some Google ads.
There are many sites that offer the very same service for a pretty penny! But the Five Minute Retirement Plan truly offers an excellent service for free.
Walkthrough
You start out by entering your age, amount saved up for retirement and how much you can contribute each year.
The next screen shows the recommended asset allocation and a full year-by-year plan. You can adjust the allocation by indicating your risk tolerance. The allocation is adjusted accordingly.
Please take a moment to read the FAQ and the Methodology. It contains some very useful information on how and why the allocation was suggested.
My thoughts
Whether you are just starting out or a seasoned investor, this is a very useful site. What do you have to lose, give it a try!
photo credit
Really good tool as a starting point . Most people will however need to read a book and or meet with an advisor for an hourly consultation, I think. I would like to see it tied in to a bit of risk tolerance questioning and some discussion of where to put the investments for tax purposes. For clients with taxable, 401(k), IRA, and Roths it gets a little tricky.
I like very much that it specifies the investments.
I just stick with target date funds because I understand them and they are where I want to be right now. Maybe one day I will look actually using something like this. I am going to go check it out now though
I have a target date fund as well.
Have you analyzed their recommendation? It’s one thing about usability and fee, that you explained very well. But, I am interested to know how useful their asset allocation techniques are. Did you try putting different age to judge the difference in their result?
Thank you for sharing this tool, MC. I was asked by one of my close friends to recommend a free tool without any frills. This tool fits the bill. I am definitely going to give it a try.
First, thanks for the review. This does sound simple enough, and yes it is overlooked. I don’t stress out about retirement either. I think there is a great value to financial peace. If this plan can provide it for your friend, it would indeed be worth implementing.
BTW, I didn’t know the creators of modern portfolio theory won a NP prize of their work! That’s awesome
Great review. ABout halfway through I started thinking, “Yeah, this guy is getting paid to say this stuff.” ANd that’s the exact moment you said you weren’t, haha!
My mom is the same way as your friend. She’s been contributing to her 401k but has no interest in investments or personal finance really. It drives me crazy sometimes how she tries to avoid looking at her finances. At least she’s not wasting money on things as much as she used to and tries to use coupons and discounts more! -Sydney
I have seen this tool before and I like it. I already have a few funds/ETF they recommended. It looks like about half of their recommendations are from Vanguard. I like that because I trust Vanguard more than most outfits.
I actually like the idea of a five minute retirement plan. However when I went over to get my allocation, it did ask me to login. I am going to try again.
Looks like a great tool. I’m going to take a look. Most folks aren’t personal finance geeks, yet can still become wealthy with a solid and consistent investing plan.
This looks sweet and simple which is important. The more convoluted things get the less successful people are.
MPT is so focused on diversification. I think it makes more sense to simply own everything through the S&P 500 index fund. Simply take the amount you are willing to contribute to stocks and put it in the fund. If you want better returns, find a professional you can trust.
Also, contributing all of your stock dollars to the S&P index fund as opposed to several funds will significantly reduce the amount of money that goes to comissions.
This approach doesn’t make any sense for people who are close to withdrawal years. If you’re going to remove funds from S&P 500 you’ll have to be a master at picking your spots.
Thanks for being so generous and help us with such a tool. This is absolutely useful for a long term planning. I checked this tool quite a few times but never really got into it due to the lack of proper guidelines. But now I am definitely going to give it a try. It’s probably going to help me out with the exact sort of investing plan that I am looking for.
I love anything that can help pique the interest of non-financial people. If it’s easy and points people in the right direction, it’s my kind of tool! Hopefully people will start with this and get more interested when they see how easy it can be.
This is a pretty nifty tool. I liked how quick and easy it was — very simple to make changes to see how much an increase changes your bottom line.
Awesome review. You sure you not getting paid? I can keep a secret. Will definitely give it a try. Thanks again MC!
I am totally surprised and please how easy to understand the plan is.
Thanks a lot – it is so straight forward and appealing..
I have been reading and doing my own planning, but the one your recommended is very specific and well structured. Great post.
you want market returns, you invest how market tells you. i am a big advocate on putting a lot of investment into few deals that can pay off. but these investments need to be managed correctly.
Hey MC, Sorry I have been MIA for a few weeks. Lots happening. Renting out our house, buying another, and about to move in a little over a week. Hope your doing well. I look forward to reconnecting in the second half of the year. Blog on! Hunter.
Thanks for sharing this resource, I will check it out now. Unfortunately you can write everything I know about investing on the back of a postage stamp, so I’m sure this will benefit me!
Hum, definitely an interesting looking tool, and one I will have to give a closer look in the future. I am pretty happy with my retirement saving plan as it exists right now (other than the fact that I’d like to be able to invest more, that is), but it’s always nice to get a second, third, or fifteenth opinion on the matter.
Great tool! I love how simple it is. I was wondering, perhaps you don’t know, could you adjust it for something like a 529 plan for college?
I’d think you’d just put in something like age 40 if you were just starting out. Still.
Hey MC! How’s it going man? We miss you!
Sam
If we weren’t interested in researching our investments… I wouldn’t hesitate to hire a financial adviser. That’s what they’re there for!
I love unsolicited reviews – they are so much more organic. I love different perspectives on my retirement; and one that takes 5 minutes? I’ll definitely check it out.
The Five Minute Retirement Plan gave me some number to play with as far as my retirement plans go. I don’t know if I am going to use the numbers but it was fun making me a perfect retirement scenario.