How your FuturePath® results are determined
The Starting Point: Your Personal Information
Your path to retirement is determined first and foremost by your unique goals and circumstances. The information you entered into FuturePath when you first logged in—and during any return visits—is used in each analysis we run. The information may include your:
- Current Salary + Contributions
- Predictable Income Sources
(Social Security + Pension)
- Future Income Needs
- Desired Retirement Age
Estimating Potential Outcomes: Market Simulations
Although we can't predict the future, we can provide an estimate of your future retirement assets and income. To provide this kind of insight, FuturePath utilizes the power of Monte Carlo analysis.
Monte Carlo is an analytical tool used for modeling future uncertainty based on probability. It allows FuturePath to evaluate a wide range of potential investment outcomes by simulating how they may perform under 1,000 market scenarios. Despite our best efforts, there is no certainty that the analyses will accurately predict asset class return ranges going forward, so you should not place too much reliance on the apparent precision of the results.
Behind the Simulations: Our Modeling Assumptions
Below are just some of the key assumptions used in FuturePath:
A truly diversified portfolio theoretically involves all investable asset classes (e.g., real estate, precious metals, etc.). Since it is unlikely that investors will own all these assets, we selected the ones we believed to be the most appropriate for long-term investors.
COMPOUND RATES OF RETURN (in excess of inflation)
Your results are driven primarily by these assumptions.
All are presented in excess of inflation.
INVESTMENT EXPENSE RATIO
These expense ratios are subtracted from the return assumptions and represent what we believe to be a reasonable approximation of investing in each asset class via a professionally managed mutual fund or another pooled investment product.
Your withdrawal amount is assumed to increase by 3% each year to keep pace with inflation.
Your withdrawal amounts do not reflect any taxes that may be due upon withdrawal or early withdrawal penalties.