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Retirement Income Calculator

Will your retirement income money last? See how specific financial factors such as amount of asset withdrawal, length of expected retirement and stock and bond asset allocation mix may affect future success. Review the information in this calculator with your financial representative as you discuss your retirement planning needs.
HOW TO INTERPRET: For example, a planned 4% withdrawal rate, portfolio allocation of 60% stocks and 40% bonds and a withdrawal period of 30 years shows a 64.8% chance that withdrawals will outlast the 30-year horizon. This means that if running 1,000 Monte Carlo simulations, withdrawals lasted at least 30 years in 648 simulations and money ran out in 352. What represents an acceptable probability that assets will last through retirement varies by individual. Results may indicate that adjustments (to initial withdrawal rate, withdrawal period, portfolio allocation, etc.) in retirement plans should be considered.

SUCCESS RATE (%): The percentage of simulations resulting in a portfolio balance greater than $0 at end of withdrawal period. Balance of portfolio not allocated to stock is allocated to bond. Stock component is the Russell 3000 Index, a market capitalization weighted equity index that seeks to be a benchmark of the entire U.S. stock market. Bond component is the Bloomberg Barclays US Aggregate Bond Index, a broad-based benchmark that measures the investment grade, U.S. dollar denominated, fixed-rate taxable bond market. Different indexes produce different results. Returns for portfolio stock and bond allocations based on Morningstar Investment Management’s 2019 Capital Market Assumptions (CMA). Subtraction of 0.50% yearly investment management fee assumed. Actual fees and expenses vary by product and impact results. All returns in the analysis are assumed in today’s dollars, thereby maintaining the initial withdrawal amount (inflation adjusted) throughout the period. Success rates are based on 5,000 market scenarios and various asset allocation strategies. Results are hypothetical estimates, not predictions. Source: Morningstar Investment Management LLC.

ABOUT MONTE CARLO ANALYSIS: This tool uses Monte Carlo analysis, an analytical method simulating random returns of uncertain variables to obtain a range of possible outcomes. It involves generating thousands of scenarios, each simulating the growth of assets over a specified period of time, taking into account a variety of factors. Such probabilistic simulation does not analyze specific security holdings, but instead analyzes the identified asset classes. The simulation generated is not a guarantee or projection of future results but rather a tool to identify a range of potential outcomes. The Monte Carlo simulation is hypothetical in nature and for illustrative purposes only. Underlying each scenario presented in this analysis are certain capital market assumptions (e.g., rates of return, volatility as measured by standard deviation,* correlation between asset classes.**) Rate of return is forward looking. Capital market assumptions regarding rates of return for various asset classes and the probability analysis applied to these returns are key to the underlying results. Results may vary with each use and over time. This analysis is not a guarantee, prediction or projection of any particular result. Actual results will vary materially. The analysis can be used to help evaluate how certain decisions or strategies may impact the ability to achieve goals. Users should allow a margin of error and view the results as reasonable estimates but should not rely on the apparent precision of the results. *A measure of how far a data series moves above or below its average. **A measure of the degree in which returns are related to or dependent upon each other.

MATERIAL ASSUMPTIONS INCLUDE: Projections assume the withdrawal in the first year of the stated percent of the original portfolio value. Withdrawal amounts (not percentages) are assumed to be linked to inflation to maintain consistent purchasing power in real terms. Initial withdrawal amount is the percentage of the initial value of the investments withdrawn on the first day of the first year. Assumed arithmetic nominal returns by period: stock 5.38% (years 1-10), 9.69% (years 11-20), 9.77% (years 21+); bond 2.23% (years 1-10), 3.15% (years 11-20), 4.54% (years 21+). Inflation of 2.20% assumed constant. Standard deviations of 15.86% (stock) and 4.32% (bond) assumed. Stock/bond correlation of 0.10 assumed.

MATERIAL LIMITATIONS INCLUDE: Extreme market movements may occur more often than in the model. Actual long-term results for each asset class will differ from assumptions. Market crises can cause asset classes to perform similarly, lowering the accuracy of projected return assumptions and diminishing the benefits of diversification. Diversification may not protect against market risk. Actual returns may be more volatile than projected in the analysis. The model does not consider correlation among asset class returns. It does not reflect the average periods of bull and bear markets, which can be longer than those modeled. Inflation is assumed to be constant, so variations are not reflected in calculations. Taxes are not taken into account, nor are early withdrawal penalties. The analysis uses two asset classes. Other asset classes may provide different returns or outcomes than those used. There is no guarantee that actual future market returns will be consistent with these assumptions and limitations. The analysis models portfolios comprised of asset classes, not investment products. As a result, the actual experience of an investor in a given investment product may differ from the range generated by the simulation, even if the broad asset allocation of an investment product is similar to the one being modeled.

No bank guarantee | Not a deposit | May lose value | Not FDIC/NCUA insured | Not insured by any federal government agency