# True Retirement Cost Calculator

## For retirement income, less can really mean more.

The True Retirement Cost Calculator uses data from different economic scenarios to assess your ability to meet retirement goals. It is intended to help you understand how purchasing an income annuity might help you meet your retirement income needs at a lower overall cost.

(With 50% allocation to equities and 50% allocation to fixed income)

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(With 50% allocation to equities, 10% allocation to fixed income, and 40% allocation to income annuities)

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retirement cost

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### Assumptions:

Both scenarios have a 90% success rate and reflect the average amount you would need to have saved today to meet your total spending need in retirement.

The True Retirement Cost Calculator uses data from different economic scenarios to assess your ability to meet retirement goals. It is intended to help you understand how funding retirement spending partially through the purchase of an immediate or deferred income annuity may cost less than relying on traditional assets alone (e.g., equities and fixed income). The projections or other information used in the calculator are hypothetical. They do not reflect actual investment results and are not based on actual securities or other investments.

Results may vary each time an analysis is run and over time.

Your actual experience will depend on your individual situation and the actual performance of the traditional assets and/or income annuities involved.

#### Assumptions for the Income Annuity:

The calculator uses Deferred Income Annuities (DIAs) if you haven't reached Retirement Age or Single Premium Immediate Annuities (SPIAs) if you have reached Retirement Age. For simplicity, the calculator assumes the user is Male. The hypothetical results use either SPIA or DIA payout values for a life-only option which guarantees payments as long as the annuitant lives. The payout values are based on an average for the type of income annuity using the life-only payout rates for an individual of the approximate age selected, offered by New York Life and some of it highly-rated competitors. All annuity rates are as of 2/3/20.

#### Traditional Assets Expected Returns Assumptions:

The calculator does not use the actual or expected returns of any assets that you own. It uses historical average equity returns of 10.4% with a standard deviation of 17.7%, and fixed income returns of 4.8% with a 6.1% standard deviation across all return scenarios, based on historical data observed from 1871-2019. It assumes a correlation coefficient of 5.3% based on historical returns from 1871-2019 to measure the statistical relationship between the performance of the equity and fixed income proxy information used. All data on returns and standard deviation was obtained from economist Robert Shiller's online dataset (www.econ.yale.edu/~shiller/data.html). The assumed equity and fixed income returns are applied to a cash flow simulation that is based on the information that you provided concerning your age, retirement age and anticipated annual income need in retirement. Our analysis assumes that fees would reduce the returns on these indices by 2% annually.

#### Inflation Assumptions:

To account for the effects of inflation, the analysis increases the annual income need amount by 1% each year. For instance, if you indicated an annual income need of $40,000 in year one, the analysis assumes that in year two you will have an annual income need of $40,400. The inflation adjustment begins once when you start taking income.

#### Life Expectancy Assumptions:

For all scenarios shown, the calculator assumes the planning period ends at age 95 (i.e., it is not based on actual longevity projections).

(1) The calculator models each client's age and retirement age to the nearest 5 years. For simplicity, the calculator assumes the user is Male. The tool models each client to the nearest 5 years. For example, if the client were 63 years old, the model would round up to age 65 and provide outcomes based on the modeled age (65), not the actual age (63).

(2) This is a number provided by you and New York Life has not made any assessment as to the accuracy of the amount indicated.

(3) This number reflects the amount of money needed today to support the inflation-adjusted income level you provided through age 95. These results assume 50% of the portfolio is invested in equities and 50% is invested in fixed income.

(4) This shows the percentage of income need that is covered by guaranteed sources of income (i.e., annuity income) at retirement age.

(5) This shows the percentage of income covered by non-guaranteed sources of income such as stocks and bonds (i.e., 100% minus percentage of income covered by guaranteed sources at retirement) at retirement age.

(6) This number reflects the amount of money needed today to support the inflation-adjusted income level you provided through age 95. These results assume 50% of the portfolio is invested in equities, 10% is invested in fixed income, and 40% is allocated to an income annuity.

(7) This represents the difference in cost between funding the clientâ€™s stated income needs through age 95 with a traditional asset-only portfolio (allocated 50/50 equities and fixed income) versus a portfolio that includes traditional assets and an income annuity (allocated 50/10/40 between equities, fixed income, and an income annuity respectively).