The projections in this article were calculated using the Retirement Income Calculator. The calculator uses Monte Carlo analysis to generate 1,000 hypothetical scenarios based on inputs such as, but not limited to, performance of various asset classes; saving and spending assumptions; a client’s time horizon, life expectancy, income, and expenses; and other variables. The Monte Carlo analysis provides ranges of potential future outcomes based on a probability model. The Monte Carlo simulation runs the user’s scenario 1,000 times. So, for example, if 600 of those runs are successful (i.e., all goals are funded and the user has at least $1 of assets remaining at the end), then the probability of success would be 60% and the probability of failure would be 40%. For purposes of the illustration: Hypothetical Investor No. 1 Assumptions (Fig. 2): is assumed female, single, and residing in Colorado with a date of birth of June 1, 1963. Ninety percent of the assets are in qualified retirement accounts. Expected annual living expenses in retirement are initially assumed $52,074. Those expenses are assumed to increase to $62,000 (about 20% from initial) and to $57,000 (about 10% from initial). To assess a decline of 20%, the starting asset value of $1,000,000 was reduced to $800,000. Hypothetical Investor No. 2 Assumptions (Fig. 2): is assumed male, single, and residing in Colorado with a date of birth of April 1, 1973. Ninety percent of the assets are in qualified retirement accounts. Expected annual living expenses in retirement are initially assumed $75,000. Those expenses are assumed to decline to $70,000 (about 6% from initial). Both illustrations assume the use of an aggressive allocation (90% stocks, 10% bonds) and a moderate allocation (60% stocks, 40% bonds). These allocations are assumed to be rebalanced annually to remain consistent. For details on this and other assumptions, please read our Methodology and Assumptions (PDF).
The information provided in this tool is for general and educational purposes only and is not intended to provide legal, tax, or investment advice. The assumptions and methodology are not tailored to the needs of any specific investor. Results are intended as an aid, are not guaranteed, and should not be your only source of information when making financial decisions. Other T.RowePrice educational tools or advice services use different assumptions and methods and may yield different results.
IMPORTANT: The projections or other information generated by the Retirement Income Calculator regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. The simulations are based on assumptions. There can be no assurance that the projected or simulated results will be achieved or sustained. Actual results will vary with each use and over time, and such results may be better or worse than the simulated scenarios. Clients should be aware that the potential for loss (or gain) may be greater than demonstrated in the simulations.
Important Information
The T.RowePrice Retirement Advisory Service™ is a nondiscretionary financial planning service and a discretionary managed account program provided by T.RowePrice Advisory Services, Inc., a registered investment adviser under the Investment Advisers Act of 1940. Brokerage accounts for the Retirement Advisory Service are provided by T.RowePrice Investment Services, Inc., member FINRA/SIPC, and are carried by Pershing LLC, a BNY Mellon company, member NYSE/FINRA/SIPC, which acts as a clearing broker for T.RowePrice Investment Services, Inc. and T.RowePrice Advisory Services, Inc. and T.RowePrice Investment Services, Inc. are affiliated companies.
This material is provided for general and educational purposes only and is not intended to provide legal, tax, or investment advice. This material does not provide recommendations concerning investments, investment strategies, or account types; it is not individualized to the needs of any specific investor and not intended to suggest any particular investment action is appropriate for you, nor is it intended to serve as the primary basis for investment decision‑making.
Any tax‑related discussion contained in this material, including any attachments/links, is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any tax penalties or (ii) promoting, marketing, or recommending to any other party any transaction or matter addressed herein. Please consult your independent legal counsel and/or tax professional regarding any legal or tax issues raised in this material.
The views contained herein are as of the date written and are subject to change without notice; these views may differ from those of other T.RowePrice associates.
This information is not intended to reflect a current or past recommendation concerning investments, investment strategies, or account types; advice of any kind; or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Please consider your own circ*mstances before making an investment decision.
Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.
Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. All charts and tables are shown for illustrative purposes only. Diversification cannot assure a profit or protect against loss in a declining market.
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