Not all retirement income projection tools are the same.

In fact, the modeling tools, which are becoming default features on recordkeeping and retail advisory platforms, generate wildly varying interpretations of how retirement savings will translate into income when the golden years arrive.

A new study from Corporate Insight, a provider of research and analytics to the financial services industry, surveyed 12 income-modeling tools — six from recordkeepers’ platforms, and six from retail advisory providers.

What the company found could call into question the value of some modeling tools in their existing form.

Analysts at Corporate Insight created a hypothetical saver profile: A single, 40-year old male New York resident who makes $100,000 a year and defers 10 percent of his income to a defined contribution plan, which has a balance of $100,000. His employer match is 3 percent. His 401(k) is allocated to suit his moderate level of risk tolerance, and he anticipates drawing a $1,500 a month Social Security benefit upon retiring at age 67.

Those factors, and others, were in put into the calculators, with a goal to replace 85 percent of income in retirement.

What came out was a variance in projections that amounted to nearly $30,000 in annual income, in the case of the greatest discrepancy.

$6,013 a month vs. $3,772 a month

MassMutual’s Retirement Planner tool, which is part of its recordkeeping platform, projected Corporate Insight’s hypothetical saver’s monthly income at $6,013. TIAA’s Retirement Advisor tool, a part of its recordkeeping platform, estimated the same input data to generate $3,772 a month.

The average monthly projection for the 12 modeling tools was $4,792.

No two calculators generated the same projected income.

But the Principal’s Retirement Wellness Planner, Prudential’s Retirement Income Calculator, and WealthMSI’s Retirement Planner 1, the tool of the plan rollover specialist that was acquired by DST in 2015, projected incomes within $88 of one another.

Gap analysis component

Nine of the 12 analyzed tools feature a “gap analysis” component, which compares current retirement income projections to a predetermined income replacement goal.

That analysis — measuring how a investor’s savings tendencies measure against the set goal — provides valuable context to income projection modeling, say Corporate Insight’s analysts, “and should be incorporated into the results of all retirement planning tools,” according to the report. MassMutual, the CalcXML 401(k) income calculator, and Capital One’s Retire My Way tool do not offer the gap analysis.

The nine tools that do offer gap analysis base their conclusions on vastly different income replacement rate goals.

For instance, Principal’s tool sets a monthly income replacement goal of about $9,000 for Corporate Insight’s hypothetical saver, the highest among the tools. TIAA set the lowest monthly income replacement rate goal, at about $4,900. The average income goal is set at about $6,600.

6 reasons for variation in the projection models

Corporate Insight identified six factors that led to the wide variation in modeling projections: taxes, inflation rates, salary growth, Social Security benefits, investment returns, and age —including expected retirement age and life expectancy assumptions.

Among those variables, assumptions on investment returns were the greatest reason for the wide discrepancy in projections, according to Corporate Insight.

Some of the calculators only permit one investment return assumption, meaning income projections don’t account for lower returns on less risky portfolio allocations after retirement.

Capital One assumes a pre- and post-retirement return of 7.35 percent for investors that select a “moderate” asset allocation strategy. Its tool projects the third highest monthly income at roughly $5,500, despite the fact it does not account for Social Security income or increased salary deferrals as income grows throughout a saver’s career.

Principal’s tool assumes a life expectancy of 92 years, and a 7 percent pre and post-retirement investment return.

The Merrill Lynch and WealthMSI tools apply more modest post-retirement return expectations, at 4.7 percent and 4 percent, respectively.

Part of the explanation behind MassMutual’s highest income projection is that the tool provides a non-adjustable Social Security benefit estimator, which offered a high benefit relative to Corporate Insight’s hypothetical saver’s earnings history, the analysts said.

Betterment and TIAA’s projection tools offer the lowest incomes at $3,791 and $3,772, respectively, largely because they are the only among the surveyed calculators to account for taxes and estimate projections in post-tax amounts, Corporate Insight’s report said.

Takeaways for sponsors and participants

While becoming a common feature, income replacement projection tools are still a relatively novel concept, and are likely to evolve as utilization increases.

Drew Way, senior retirement analyst at Corporate Insight and lead author of the study, said the data suggests sponsors and participants need to regard the tools as more of a guide than an exact predictor of retirement income.

“The biggest takeaway from this study is that individuals using retirement planning calculators need to be mindful that the underlying assumptions the tools employ can have a profound impact on both the results and the goal recommendations,” Way told BenefitsPro in an email.

"It's important, then, to at least know the assumptions a tool is using and to understand that it’s not meant to provide a 100 percent accurate analysis of an individual's level of retirement readiness,” he added. "Instead, the tools are meant to give users an approximation of where they stand with regard to achieving their retirement goals, and to equip them with the knowledge to then make appropriate actions to help them achieve those goals.”

Instant Insights /

Retirement income calculators: What to know about their projections

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