Your Retirement Preparedness Measure (RPM) score represents the percentage of your average estimated retirement expenses your plan could potentially cover, assuming a significantly below average market. More specifically, it represents the ratio of the two hypothetical retirement income estimates to the left ('You may have' and 'You may need').
Hypothetical Income Estimates
The 'You may have' amount represents an estimate of the amount of monthly income you may have once you reach the age at which you've indicated you expect to retire. The estimate is based on the potential performance of a hypothetical portfolio of indexes with an asset allocation similar to the accounts assigned to your retirement goal under simulated significantly below average market conditions, and Social Security and other income sources you chose to include in your retirement goal. This analysis assumes that you continue to save and budget as you've modeled in Planning & Guidance Center's Retirement Analysis tool (the "Tool").
This estimate is based on the Accounts and Income Sources, Savings Rate and Asset Mix information you provided the last time you used the Tool. You can model other market conditions and potential outcomes by visiting Planning & Guidance Center's Retirement Analysis tool. See below for more details on different market conditions.
The 'You may need' amount represents an estimate, based on your current compensation and estimated lifestyle or either your estimated or budgeted retirement expenses, of the amount of money we think you (or you and your partner if you're planning with one) will need each month in retirement. This estimate is based on the Time and Expenses information you provided the last time you used the Tool.
The RPM Score
The RPM score can be classified into four categories on the retirement preparedness spectrum based on your illustrated ability to cover estimated retirement expenses, assuming a significantly below market:
- Dark green: On Track (95 or over). You are on track to cover 95% or more of total estimated expenses.
- Green: Good (80-95). On track to cover essential expenses, but not discretionary expenses like travel, entertainment, etc.
- Yellow: Fair (65-80). Not on track to sufficiently cover all essential retirement expenses, with modest adjustments to your planned lifestyle likely.
- Red: Needs Attention (Less than 65). Not on track to sufficiently cover all essential retirement expenses, with significant adjustments to your planned lifestyle likely.
Understanding Market Conditions
Significantly Below Average Market: A significantly below average market is defined as the 90% confidence level of estimated future balances and/or estimated future income. The 90% confidence level represents "significantly below average market conditions" with 10% of all hypothetical scenarios tested performing worse. This means that in 90 out of the 100 market scenarios tested a hypothetical portfolio similar to yours performed at least as well as the results shown and 10 out of 100 performed worse than the results shown.
Below Average Market: A below average market is defined as the 75% confidence level of estimated future balances and/or estimated future income. The 75% confidence level represents "below average market conditions" with 25% of all hypothetical scenarios tested performing worse. This means that in 75 out of 100 market scenarios tested a hypothetical portfolio similar to yours performed at least as well as the results shown and 25 out of 100 performed worse than the results shown.
Average Market: An average marked is defined as the 50% confidence level of estimated future balances and/or estimated future income. The 50% confidence level represents "average market conditions" with 50% of all hypothetical scenarios tested performing worse. This means that in 50 out of 100 market scenarios tested a hypothetical portfolio similar to yours performed at least as well as the results shown and 50 out of 100 performed worse than the results shown.
You can model other market conditions and potential outcomes by visiting Planning & Guidance Center's Retirement Analysis tool.
Dollar Values: Future vs. Current
Future dollars and current dollars (also known as "today's dollars") are different ways of viewing values over time. The hypothetical income estimates are presented here in current dollars, but both ways are correct means of presenting values. Future dollar values illustrate how a current expense would grow over time taking into account the effects of projected inflation. For example, if something costs $1,000 today, in 10 years the future dollar value is $1,280 ($1,000 plus 10 years of assumed inflation growth at 2.50%). This method is used to estimate the effects of inflation. Note that the Tool always uses your stated retirement date, or the current year if you are already retired, as the date for which this valuation is made on your expected retirement expenses. If you indicated that you are already retired, the Tool will provide a future dollar amount that is equal to today's value.
For more details, read Retirement Analysis Methodology (PDF)
You can update your score by visiting Planning & Guidance Center
