I spent last weekend thinking about how long I had to live and whether I'd spend my final years eating from dented cat food cans. This was not brought on by any kind of late-winter gloom. Rather, I was test-driving several online retirement planning tools, namely Financial Engines, Morningstar's ClearFuture, Financial Plan Auditors and Quicken.com's 401k Advisor.

Each of these applications helps you take a hard look at your savings rates, and in some cases your investment style, or lack thereof. Using statistical analysis software, they forecast what kind of income to expect in retirement. In other words, you'll find out whether you can spend those years in a home on Kauai or working at Burger King.

In fact, the kind of planning process Financial Engines and its competitors lead you through simulates the approach a financial planner, or maybe an annuity salesperson, might take. You're asked about your income goals, your spending needs and so on. The better applications let you factor in all your current investments, even specific stocks or mutual funds. Not only that, they calculate your expected Social Security income and use actuarial tables to predict when you'll depart the food chain. The most advanced planners even suggest ways you can tweak your portfolio for better results.

The software engine that drives each of these planners is something called Monte Carlo simulation. Basically, Monte Carlo simulation tests your investment plan by running it through hundreds of varying economic scenarios, all in less time than it takes to brush your teeth. (


contributing editor Vern Hayden's recent

column on Monte Carlo simulation goes into a lot more detail.)

Each of the four planners I tried takes around 20 minutes to complete. You'll need to have your recent financial statements handy, because you'll be asked to enter things like the mutual funds you own, bank account balances, etc. As tedious as this data entry might seem, I'm convinced it's a lot better than spending time with four or five annuity sales reps. But should you trust the advice you receive? Here I'm not so sure. Before getting into some specific concerns, let's take a quick look at each of these apps.

Financial Engines

With $120 million in backing from the likes of

Goldman Sachs

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, Financial Engines clearly has the most hype and muscle behind it.





Merrill Lynch


Charles Schwab


Fidelity Investments

are among the half-dozen brokerages that have licensed Financial Engine's software for use by their clients. The company's credentials are pretty impressive as well. It was launched last year by Nobel Prize-winning economist William Sharpe, one of the inventors of Modern Portfolio Theory. And yes, Financial Engines is modeled on the asset allocation principles of Modern Portfolio Theory. (For an explanation of Modern Portfolio Theory, see a

Fund Forum from the archives.)

Financial Engines will create a long-term forecast that takes into account your 401(k), IRA and taxable savings, and brokerage accounts. It's the only one of the four reviewed here that lets you take individual stocks into account as well as mutual funds. The beauty of Financial Engines is that it calculates things like tax rates and allowable contribution rates automatically. When done, you'll get best-case, worst-case and median projections of the value of your investments at retirement. You'll also be told the likelihood that you'll reach your financial goals. In my case it was 14%. If you want to better those results, you're invited to sign up for Financial Engines' premium service. For $60 per year you can get computer-generated advice -- including specific fund recommendations -- on how to tweak the tax-deferred portion of your portfolio. For $190, you can do the same for multiple accounts. (Note: The site was running slow or not at all early Friday, so you may encounter problems.)

Financial Plan Auditors

This site underwent an extensive revamping earlier this month. Its core remains Financial Plan Auditors, however. FPA is really a kind of marketing tool, designed to link investors with financial planners -- real live human ones, that is. Accordingly, FPA doesn't let you enter in specific mutual funds. Instead it prompts you with general questions about your savings rate, your income level and the amounts currently in your various retirement accounts. Then the software engine tests this data against numerous economic scenarios and tells you the likelihood, in percentage terms, of meeting your retirement goals. For me, it was 22%. When you receive the verdict, you're invited to contact one of the site's sponsoring financial planners for a more thorough analysis (for which you'll have to pay).

Morningstar's ClearFuture

Morningstar's detailed reports on thousands of mutual funds have always made this site worth visiting. ClearFuture, the new retirement planner, has been packaged with some other premium content. Together these services retail for $99 annually. But you might try calling 800-735-0700 to see if Morningstar will give you its current sale price of $49. In any event, you can test ClearStation during a 30-day free trial.

ClearFuture gets high marks for user friendliness. You're guided through the whole process by two Jetsons-like characters, Jake Starlight and his perky dog Maggie. Make a mistake while you're inputting financial data, and a prompt appears saying something like, "Whoa there, not so fast. You need to fill in a little more information."

Alas, ClearFuture only analyzes 401(k) plans. If you have a 401(k), just input all the funds that are allowed under your plan, and it will project their value at retirement. However, if you have an IRA, you can choose whatever funds you want and pretend that it's a 401(k). As an experiment, I used the fund screener at Quicken.com to create a list of top-performing technology and international funds and entered them into the planning tool. My list was made up of funds with triple digit one-year returns in some cases, and many had five-year annualized returns north of 30%. But ClearFuture evidently reasoned that these gains were anomalies; it instructed me dump most of them. And even then, in order for me to earn a retirement income of $90,000 per year -- which would include about $20,000 from Social Security -- it said I'd need to work a half-time job for life. Ouch.

Quicken 401k Advisor

Quicken's planner is fast, easy and free. Enter the name of your company and it will automatically pull in the investments allowed within that company's 401(k) plan. (Assuming your company is in its database.) You can also automatically pull in data on an IRA from your brokerage account (although this feature wasn't running when I tried it). Then, just follow the steps, and you're given a projection of your retirement income and an optimal allocation.

The thing that's really nice about Quicken's plan is that it lets you customize some key variables that its competitors fill in for you automatically. Specifically, you can enter in your average projected salary increases. Other plans might simply factor in a yearly average of, say, 3%. A word from the plan's sponsor, North Carolina financial advisory firm


, appears when you're done. Its consultations start at $49.

And the Winner Is...

My vote goes to Financial Engines since it lets you enter individual stocks as well as mutual funds. Quicken.com and ClearFuture finish a close second because they both create a portfolio for you, though the portfolios only consist of mutual funds. And to be fair, Financial Plan Auditors is the place to go if you want to locate a warm-blooded financial adviser.

That said, I'm not certain you should view any of these apps as the Holy Grail. The fact that each one gave me different answers is reason enough to question them. But my real doubts center on the assumptions these planners make, namely that you should allocate your assets among defined categories such as large-, medium- and small-cap stocks, with some international holdings thrown in. And once that's done you should simply relax or at worst slightly adjust your holdings each year. Form a plan and stick with it through thick and thin: A classic asset allocation strategy, in other words.

But does it still hold true? Those who religiously stuck to this strategy through much of the '90s found that their portfolios languished as small-caps got caught in a time warp and many international stocks tanked. Meanwhile, large-caps surged to unprecedented heights. As a December 1999 article in

Bloomberg Personal

noted, even asset allocation's staunchest proponents are rethinking their approach these days.

The big danger with online financial planners, it seems to me, is that some people will follow their advice to the letter and wait passively for the gains they believe they've been promised. The era of the passive investor may well be over. This is not meant to be an outright condemnation of these apps; going through the planning process can be very useful. Just consider it a first step.

Mark Ingebretsen is editor-at-large with

Online Investor magazine and a consultant to a major insurance company. He has written for a wide variety of business and financial publications. Currently he holds no positions in the stocks of companies mentioned in this column. While Ingebretsen cannot provide investment advice or recommendations, he welcomes your feedback at