In this podcast, Sean Gates of Motley Fool Wealth Management joins Motley Fool personal finance expert Robert Brokamp to discuss what to look for in a high-quality retirement tool.
Also in this episode:
- How the Fed rate cut will affect your finances.
- REITs have similar long-term returns as the S&P 500 but dissimilar short-term returns, which can add diversification to your portfolio.
- How the 0.01% rule can help determine whether you can afford an impulse purchase.
- The job market is slowing down, so it might be time to polish your resume.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.
A full transcript is below.
This podcast was recorded on Sept. 20, 2025.
Robert Brokamp: How to analyze your retirement plan with online tools and how the Fed will affect your finances. You're listening to the Saturday Personal Finance Edition of Motley Fool Money. I'm Robert Brokamp, and this week, I speak with financial planner Sean Gates about how to choose a high-quality retirement calculator and a few to consider. But first up, let's talk about what happened last week in money. We start, of course, with the widely anticipated interest rate cut from the Federal Reserve. The Fed saved 0.25% off the target for the Fed funds rate and suggested that two more cuts could be coming this year, with maybe another in 2026. Now the Fed's in a tough spot. Trying to prop up the job market while not stoking inflation, which has been ticking up lately. In the press conference after the meeting, Chair Jerome Powell said, ''We have two-sided risks, which means there is no risk-free path.'' Still, I think it's likely that more cuts are coming. What does that mean for your finances? Well, one interest rate that reacts almost immediately is the prime rate, which is generally three percentage points above the Fed funds rate. The prime rate is the rate that banks charge their most creditworthy customers for things like home equity loans, auto loans, credit card balances. The prime rate could also affect other rates, such as those on 401K loans, which are unique because you're actually borrowing money from yourself.
Other rates that may or may not come down or at least come down as much and as soon are the rates on things like intermediate to long-term bonds, which are determined largely by the buyers and sellers of bonds from all over the world. Bond rates, in turn, have a big influence on the 30-year mortgage rate, which has already come down quite a bit over the past year, currently sitting at 6.22%. Perhaps any influence the Fed may have had may already be factored in. Other rates that are likely to drop soon, and, in fact, already have been on the decline, is what we get on our cash and money markets. Given that more cuts are likely, it might make sense to lock in current rates with maybe some individual CDs or short-term treasuries with some of your cash that you don't need in the near term. Moving on to our next item, happy 65th birthday to Real Estate Investment Trust, AKA REITs. They were created on September 14th, 1960, when President Eisenhower signed the Cigar excise tax extension of 1960, which contained a provision that gave investors a way to buy shares of companies that own diversified portfolios of income-producing real estate. One thing that investors like about REITs is that they tend to have higher yields than the average stock because they generally pay out at least 90% of their income as dividends to maintain some tax advantages. The yield on the Vanguard real estate ETF, ticker VNQ, is currently 3.8% compared to 1.2% for the S&P 500. REITs invest in all kinds of real estate. We're talking like offices, hospitals, apartments, malls, storage facilities, even data centers, and cell towers. The National Association of Real Estate Investment Trust maintains a data library on its site that goes back as far as 1972. Since then, equity rates have returned an average 11% per year, which is pretty much exactly the same return as the S&P 500. But they don't behave the same way as the S&P 500 from one year to next, which means they can add some diversification to your portfolio. Unfortunately, diversification is double-edged sword.
Investors loved REITs when they made money while the S&P 500 plummeted during the dotcom crash, but not so much over the past several years when US large-cap stocks have pretty much been the best game in town. REITs have underperformed not only because they tend to fall more into the small and mid-cap category, but they can also be sensitive to changes in interest rates. They've struggled since REITs began to rise in 2022, but now REITs are likely heading the other way, which could be a tailwind for future REIT returns. Now for the number of the week, which is 0.01%. That's a rule of thumb created by author Nick Maggiulli of Ritholtz Wealth Management and discussed in his latest book, The Wealth Ladder, and also covered in a recent Wall Street Journal article. Here's how it works. Let's say you're debating about whether to make a purchase, such as going out to eat or buying a shirt you see in the store. Maggiulli says that if the purchase is less than 0.01% of your net worth, don't sweat it. For someone worth $100,000, that no sweat limit would be 10 bucks, whereas someone worth $500,000 could spend $50 guilt-free. The math behind the rule is that 0.01% a day is around 3.7% a year, and hopefully your portfolio is earning more than that, plus, you may also be adding to it with regular contributions. You're likely not jeopardizing your future finances with purchases that are 0.01% of your net worth. That said, even small amounts can add up, which is why, as Maggiulli says in the journal article, it's something to use maybe a few times a week. Now obviously, most of us spend way more than 0.01% a day on things like housing, food, transportation, raising kids, and so on. For me, the rule of thumb is most useful when you're in a situation where you're just debating about whether to make an impulse purchase. For some people, the rule will say no, you should instead keep your money. Whereas for others, especially those who have been frugal for years and maybe built up a good amount of savings, it'll give them permission to relax and maybe live a little. Up next, crunching your retirement numbers when Motley Fool Money continues.
Retirement is largely a math game, and calculators could help you crunch the numbers. Fortunately, the Internet is full of retirement tools, but some are much better than others. Here to join us to discuss what to look for in a high-quality retirement calculator is Sean Gates, a financial planner with Motley Fool Wealth Management. Sean, welcome to the show.
Sean Gates: Good to see you again, my old friend.
Robert Brokamp: I should add that Sean is not only a financial planner with Motley Fool Wealth Management, but he's the first person I ever hired as a manager at the Motley Fool, so I'm so proud of him. Let's get into the show here. Let's start with your take on why people should spend time with retirement calculators.
Sean Gates: I think everyone has questions about whether they will be successful in retirement, but they may not want to engage a paid professional to answer that question. A lot of people will look for calculators to try and give them a half-measure answer. But I use all of these calculators. I've used probably 15 different calculators, some professional, some DIY, and so I'm excited to talk about the topic.
Robert Brokamp: You have to use something. Retirement's pretty complicated with all these moving parts, all these variables what your portfolio is going to earn, when you're going to claim Social Security, the taxation of different accounts. You can't do it in your head. You need some tool to do it for you.
Sean Gates: Not only do you need a tool to help you do the math and the projections, I would argue being able to visualize and see the details of each year that you're projecting is super critical. I also think the feedback mechanism of seeing how it is actually updated year by year matches those projections, which a lot of people don't always do.
Robert Brokamp: Those are the reasons to do it, and there are plenty of tools out there to do it with, but they're not all created equal. In fact, in 2018, a study looked at 41 retirement calculators and found that ''The majority of tools are inaccurate, making it dangerous for the public to trust tool outcomes.'' What do you think people should look for in a good retirement calculator?
Sean Gates: I think that study is well-intentioned, but I would make one call out at the top of our conversation, which is, I think, retirement projections are purposefully overly scary. Meaning most of the calculators make many conservative assumptions to protect both the calculator creators or the person using that calculator. Then, if you actually ran out the projections into the future, most people die with well more money than they need. I think it's doing a disservice to people who might want to live fully with a smaller set of resources, perhaps. But with that out of the way, I think the biggest thing that you need to use inside the calculator is one that allows you to see the cash flows on a year-by-year basis, because these are just big calculators, and the inputs dramatically affect the outputs. If you can't see what's happening from your inputs as a resolution on the outputs, how do you address that? How do you know to course correct? I should say, even if you have a professional, if they can't see it, they're probably guessing to some extent.
Robert Brokamp: Trusting a lot in the math going on in the background. There's no really way to check whether everything is going according to what you expect.
Sean Gates: Totally, which some of them will do cash flow year by year, inflows and outflows. This would be traditional accounting. A cash flow statement where you see the income coming in for the year, the expenses, taxes going out for the year, and then the amount that might be left saved or spent. But being able to see that and say, hey, that looks very close to my budget and my income as projected into each of these years in the future is really critical.
Robert Brokamp: I mentioned a few yellow or red flags that come to mind. For me, when I look at a calculator, you let me know what you think and if there are other ones that you think are important too. For example, if I pull up a calculator, if I see that it does not ask for the type of account I have, it's not asking whether it's Roth or traditional, or taxable, that makes me a little suspicious. If it doesn't allow me to customize Social Security, whether I receive it or not, and whether I'm putting in the figure, if it has default investment returns that I can't customize, or if it doesn't assume a long enough life expectancy. Some of them, you don't even know what the life expectancy is, or I've seen them where your life expectancy is going to be average, which is about whatever, 85 or so. But of course, that means half the people are going to live longer.
Sean Gates: I think those are all great flags. I would agree with most of those. I would say that there are a number of tools that have gotten much more sophisticated over the last 3-4years. I would almost bucket out the calculators, where there's the one-page input section, that then you get a PDF. Then there's another bucket that is much more interactive, where you can add accounts that live in the tool, and you can apply specific investment returns and inflation returns to each component part, and play with the whole scenario generation. I would say that's one good way to be evaluating the calculators, just which bucket does this fall into. Then, as you start to look at those inputs, as you mentioned, a lot of the default ones, default assumptions are probably incorrect. One of the most common things that I see is the tool will auto apply a home expense, like repairs of 5% of the value of the home each year, because that's an easy rule of thumb, and the tool is trying to help guide the user to get the inputs in there, but that's just wrong for the vast majority of people, to your point with life expectancy, 85 is a good rule of thumb, but there's going to be a lot of people that that doesn't apply to. Like you, I hope you live to 150, so I can hang out.
Robert Brokamp: He's going to talk about a tool we like. I'm going to kick it off, and this is one I've mentioned on the show before. It's from CalcXML. They have a lot of retirement tools, so you've got to make sure you get the right one. You want to do an online search for the CalcXML comprehensive retirement planning module. You'll know you found the right one. It's got a log URL, but it's got 606 at the end. If you get that one, you've got the one I'm talking about. Here's why I like it. First of all, it's free. I love that part of it. It also allows you to break up retirement spending into three segments, which is often called the go-go years, the slow-go years, and the no-go years. But evidence is clear that for most retirees, their spending declines as they age, but there might also be an issue where you're entering retirement with your mortgage, but it's paid off in 10 years, so you want to be able to factor that into your spending. I like that it does allow you to distinguish between Roth, traditional, and taxable brokerage accounts. Allows a lot of customization in terms of what you want to assume about inflation or the raises you're going to get. A lot of that type of stuff, and it does have that year-by-year cash flow, so you can see the math as it goes throughout and gives you an eye to your point earlier, of you could, based on its assumptions, die with millions of dollars because it shows what you're going to have at the end of life. You can say, oh boy, maybe I'm playing it too safe. Those are the good things. Here are the drawbacks, and then we'll move on to the one you like. First of all, there's not much explanation about how it works. It's just a free calculator. There's no customer service. There's not really much explanation. For example, you should enter your retirement expenses after taxes, not pre-taxes. But you wouldn't know that unless you, like me, actually reached out to the company and asked that question. Probably the biggest drawback is it just assumes your portfolio is going to earn the same thing each and every year. I assume it's going to return 6%. Well, it's going to turn 6% each and every year, of course, nobody's portfolio does that. I think it's very good as free tools go, but much more limited in terms of what you can get from some more sophisticated tools. For example, why don't you tell us about one tool that you like?
Sean Gates: I have really grown to love ProjectionLab. I would say a very close competitor that you and I both know about is also Boldin, which used to be NewRetirement. Actually, I think if you follow Ron Berger, he has done a comparison between these two tools because I think they're rising to the top of DIY planning tools. ProjectionLab is what I've gravitated to for a few reasons. Number 1, it's very cheap. There's a free version with limited feature sets, but even a larger or more robust version is only like 100-150 bucks a year. The prices change every now and then. But the customization is extremely robust. To your point, a lot of default calculators will take an investment rate of return and just apply that into the future. The default rate of return on a projection plan is often set to what they call a fixed rate return visualization of the plan. But you can then override that vis-a-vis Monte Carlo simulation, then we'll default to showing the historical rates of return and volatility applied to your individual circumstances.
Robert Brokamp: Can you explain a little bit what Monte Carlo is, real quick, for the folks? For the folks who don't know Monte Carlo analysis, what does that mean, real quick?
Sean Gates: Just a very simple explanation is it's a mathematical probability engine, so it'll take the historical rates of return and standard deviations, apply them to your asset base, and add that variability in a year-by-year fashion to your scenario and give you an average chance of success that each of those individualized trials run out at. You can use that as a rough rule of thumb. A chance of success of 80%, let's say, is your output. Easy to digest. But so that Monte Carlo simulation is able to be applied to this scenario with the historical rates of return. Because we only have a certain amount of history, you actually have to set a loopback year because some of these plans might last for 50, 60, 80 years. There's not enough historical data to push it through. That's a cool feature, too. Then the visualizations are very nice. It has an excellent UI. It has what's called a Sankey chart for the cash flow chart, which is, I like to take a bit like Pacman, where your inflows are the big mouth, and then it closes on the expenses, and then what squirts out on the other end is you're savings. [laughs] But it's a very easy, clean way, and you can scroll through each of the Pacman visualizations to gut check the math on a year-by-year basis. Then you can set individualized expenses with certain start and stop dates. You can set the life expectancy. Everything is really customizable. That's probably leads into the biggest con, which is it can be overwhelming. I mentioned a lot of these tools will develop guided paths to help people get started. Because there's so many variables affecting this over a really long period of time, it can just cause analysis paralysis. That find to be true, for the most part for projection lab is that you just get overwhelmed. Not to mention, if you start creating scenarios. All of these plans can be thought of as having a base plan where there's these foundational inputs. But then you might want to say, what if I only make $50,000 in retirement instead of $100,000? These more sophisticated tools will let you say, well, compare that to the base case. You have all the foundational inputs that you have to make sure are right, and then you have to make sure that you're tracking the changes that you're making in what we like to call the what-if scenario. It can just be very overwhelming. But that's a plus and a minus two ProjectionLab with the ability to do that, but also cause confusion.
Robert Brokamp: You highlight a couple of interesting things. First of all, you want a tool that you're comfortable with and you want to interact with. The design is important. I feel the same way about any budgeting tool or anything like that, too. I think that is good. They are fully aware that if they ask for everyone to input everything, there are some people who will never do it, so they try to simplify it, but then maybe they might be simplifying it at the cost of accuracy.
Sean Gates: Totally. One thing I would be remiss to say as a positive a projection lab, and this is a unique feature set that not a lot of software s that I've used or seen is the ability to easily export the file. All of those inputs that we've been talking about, all the datasets, you can actually just download it into a very simple computer program, and then you can reimport that into a version that someone else might have. That's super beneficial because a lot of softwares don't allow for that. It's just a black box that you get a PDF report that's a static point in time. That's not super helpful to make changes to the assumption set. I would argue the ability to do that arms a DIY investor really well if they're shopping for help from financial advisors or wealth managers because they could just give that to someone and say, hey, here's all my inputs. Now that's good for the advisor and the consumer because you don't have to go through that work of recreating the dataset that takes someone several weeks. Hey, do you have your tax return? Hey, where's your pay stub, all that good stuff?
Robert Brokamp: Those are two to try: CalcXML Retirement Planning Module and ProjectionLab. Want to name a couple of others. You named one already. It's Boldin, formerly NewRetirement, created by Steve Chen, an impressive fellow who has been on this show before. It has a free version as well as a premium version, $144 a year, and a disclaimer, Motley Fool Ventures is an investor in Boldin. Then another tool is MaxiFi, M-A-X-I-F-I, created by Economist Larry Kotlikoff, also a bright fellow who's bid on this show, and that costs $109-149 a year, depending on the version you sign up for. Like, the more advanced one will let you do Roth conversion analyses, for example. Do you have another to suggest, Sean?
Sean Gates: I do. This is maybe a disclosure is this person also used to work for Motley Fool Wealth Management, but cFIREsim, long before they came aboard at The Motley Fool, they no longer work for The Motley Fool, but they are improving that tool and have built that tool from the ground up. It's a fire namesake. That cFIREsim from Lauren Boland.
Robert Brokamp: Those are a few to try, and I do think it makes sense to do more than one. None is perfect. Using a few of them is a good way to get a second or third opinion about your retirement. Yes, if you're using a few of these, it's going to cost you some money. But I think retirement is such an important decision, such an important goal. It's worth the money to put in that extra investment.
Sean Gates: Any dollar spent on something like this in an absolute value compared to having a money manager is going to be quite small in the grand scheme of things. Not saying it replaces that, but just trying to contextualize the cost of doing something like this for yourself and getting educated about what retirement could look like.
Robert Brokamp: Any final words for Sean on using retirement calculators?
Sean Gates: I think we can't make a rosy picture. One of the things that I've done is I've helped in a pro bono fashion people who have ProjectionLab plans, and there's always errors. I've seen some very well-done DIY plans, which are probably 80% good. But the mistakes are such great that you're compounding this over a 30, 40-year timeline. Those small misinputs can make huge outcome differences in something like the tool. Do use these. They're cheap. They help you get informed. But then enlist a community or a professional to help gut-check your assumptions because there's going to be one that you missed.
Robert Brokamp: That's been great, Sean. Thank you for being on the show.
Sean Gates: My pleasure.
Robert Brokamp: It's time to get it done, Fools, and this week, I encourage you to look for ways to enhance your job skills. As highlighted by the Fed's rate cut, the job market is slowing down. According to Charlie Bilello of Creative Planning, the number of jobs in the US has increased by less than 1% over the past year. That's the slowest growth rate since 2021. In the past 50 years, this type of weakness in the jobs market has preceded a recession and a spike in the unemployment rate 100% of the time, according to Bilello. Here's something I try to do. I aim to be able to update my resume every year with a new skill, a new designation, maybe a new degree, or just some accomplishment of some kind. What that would be for you and your profession is unique to you. I'll tell you what I did this year. I recently passed the third exam I needed to be able to apply to be an enrolled agent. What's an enrolled agent? Well, it's a tax professional who has earned the highest credential offered by the IRS. Now, I don't plan on becoming a professional tax preparer. I sure learned a lot, which ideally will make me a better personal finance podcaster. It's a nice thing to add to my resume.
It will help me with some volunteer work that I do. Each tax season, I participate in the IRS's Volunteer Income Tax Assistance program, VITA, which offers free tax prep to lower-income citizens. Volunteer work is another way to boost your resume. If you're financially inclined and looking for a way to help some people out, see if there's one of these programs in your area by visiting the IRS website and searching for VITA. No experience is necessary. They provide the training and the software, and they're going to start looking for volunteers in the next few months. That's the show. As always, people on the program may have interest in the investments they talk about, and the Motley Fool may have formal recommendations for or against. Don't buy or sell investments based solely on what you hear. All personal finance content follows Motley Fool editorial standards, and it's not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Robert Brokamp. Fool on, everybody.
Sean Gates is an employee of Motley Fool Wealth Management, a separate, sister company of The Motley Fool, LLC. The views of Sean Gates and Motley Fool Wealth Management are not the views of The Motley Fool, LLC and should not be taken as such.
