Overview:
The Retirement Income Calculator (“Calculator”) is designed to calculate (i) what will be the guaranteed lifetime income annual amount for an annuity with an income benefit, and (ii) how a traditional non-guaranteed investment portfolio performs when subject to these same annual withdrawals. This calculation is done by Hedgeness Inc. by using its software called “Guaranteed Retirement Analytics for Income and Legacy” (GRAIL).
Calculator Methodology:
GRAIL determines the years to retirement using the user’s retirement age minus the current age entered in the Calculator and applies it to the calculations related to Annuity and Portfolio.
1. Annuity Calculations:
GRAIL calculates the Annuity Guaranteed Lifetime Annual Income using the years to retirement along with the inputs of:
- Account Value dollar amount
- Annuity Income Rates:
(a) Roll Up Rate (compound)
(b) Payout Rate
- Changing any of the inputs will result in a different output for the Annuity Guaranteed Lifetime Annual Income.
2. Portfolio Calculations:
GRAIL runs multiple historical iterations to arrive at an array of possible retirement scenarios by using the years to retirement along with the inputs of:
- Account Value dollar amount
- Withdrawal Amount equivalent to Annuity Guaranteed Lifetime Annual Income
- Asset Allocation:
- Percentage in Stocks
- Percentage in Bonds
- Years in Retirement
GRAIL uses this process to generate scenarios:
- Starting with the year 1871 returns of equity and bond (as per asset allocation), runs one scenario for years in retirement for portfolio with annual income withdrawals.
- Moving on to next year (i.e. 1872 in this case) repeats the scenario generation process.
- Continues to iterate scenario generations till last full year (2024) minus years in retirement.
- Fees applied to Portfolio are 1.3% representing the average of managed money fees for advisor and underlying fund expenses.
For the output of Investment Portfolio Income Shortfall Probability, these are the particulars:
- No Income Shortfall: Number of Scenario Generations of all the iterations starting 1871, expressed as a percentage, where ending account value is higher than or equal to zero
- Income Shortfall: Number of Scenario Generations of all the iterations starting 1871, expressed as a percentage, where ending account value is less than zero
Largest Income Shortfall in Investment Portfolio
- Lowest Income Distribution based on all Scenario Generations – 100% satisfaction being a full match of Annual Income Withdrawals in all scenarios
- Highest Income Shortfall based on all Scenario Generations – defined as the difference between Annual Income Withdrawals and Income Distributed in the worst case of a particular scenario
Changing any of the inputs will result in a different output.
By using rolling historical returns based on data of stocks (S&P Composite) and bonds (long bond yield) dating back to 1871, GRAIL analyses incorporate many environments ranging from different sequences of returns to different market volatility and reflect the multi-faceted effects of the same on the assumed portfolio and withdrawals.
Since all analyses are based on historical performance and what-if scenarios, the possible statistical relevance remains at the level of estimates that might substantially differ from future results.
Important Information and Disclosure about Hedgeness:
Hedgeness Inc. (the “Company”) produces ratings, research, and reports (collectively the “Analytics”). The Company uses proprietary software to conduct the Analytics, and this disclosure is applicable to the software and its configurations.
The information produced by the Analytics regarding the possibility of varying investment outcomes are hypothetical, do not reflect actual investment performance, and does not promise of future performance. The results may differ over time.
There is no implicit or explicit guarantee that an investment approach based on Analytics will be effective. The results shown are for informational purposes only.
The Company does not provide any guarantee or accept any liability related to quality or accurateness of data used in the Analytics and does not promise that the results of the Analytics will not diverge from their specified methodologies. The Company does not provide any guarantee for Company errors, both in regard to data and calculations thereof.
The information in Analytics should not be construed as investment advice or a recommendation by the Company regarding the use or appropriateness of the findings. Investors should consult their financial professionals to assess their investment goals. Investing involves risk, including potential loss of principal.
The Company is a software company and is not authorized to sell any security or investment advice.
All names of indices, insurance carriers, asset managers, and products used in the Analytics are the property of their respective owners, and not those of Hedgeness, Inc.
In summary, the Analytics do not constitute investment advice offered by the Company; are provided solely for informational purposes; do not constitute an offer to buy or sell a security; and are not warranted to be correct, complete or accurate.