Retirement Income Calculator Methodology
Methodology
The Schwab Retirement Income Calculator is an interactive tool to help you answer a key question about your retirement savings: How much money can I withdraw from my retirement savings and feel comfortable that my savings will last.
The Income Calculator Tool is for educational purposes and not a recommendation. "Income" for the purpose of the Calculator is defined as monthly possible return of principal from a savings balance, not investment income.
The Calculator can deliver two outputs: (1) a projected duration (in years) of how long your savings could last based on your desired monthly withdrawal amount or (2) a projected sustainable monthly withdrawal from your savings based on a selected time horizon.
The calculations are based on a combination of inputs that you provide and assumptions provided by Charles Schwab & Co. Inc.
info table 1
| Inputs you provide | How this information is used |
|---|---|
| I want to see... "How long savings might last" or "how much I could get each month." | You choose the information and calculation that you'd like to receive. |
| At retirement, I expect to have... | This amount is what you expect to have when you start making withdrawals. This may or may not be in retirement. |
| Each month I would like to withdraw... | This amount is a dollar amount that you'd like to withdraw in year 1, and then adjusting that amount annually, up or down, to keep pace with inflation. |
| I'd like for my money to last... | The amount is the number of years that you'd like for your money to last. |
| My investing style is... | This is the level of risk you're willing to accept. Usually the greater the risk, the bigger the potential swings in your portfolio, either up or down. |
info table 2
| Assumptions provided by Charles Schwab | How this information is used |
|---|---|
| Probability of success ("likelihood") of savings lasting | The calculator uses a 80% projected probability of success (defined for the purpose of the Calculator as "likelihood") that withdrawals will last over the selected time horizon. |
| Hypothetical investment return and volatility on savings based on the investing style | The calculator uses long-term return and volatility projections provided and updated annually by Charles Schwab Investment Management, Inc. ("CSIM"), based on the selected investing style. |
| Projected inflation rate | The calculator uses long-term inflation projections provided and updated annually by CSIM, to adjust withdrawals annually. |
The Calculator assumes that savings will be invested based on the investing style you selected. Future investment returns are uncertain and are volatile (i.e., vary). Monte Carlo simulation is used to project a number of future paths for savings, after taking into account withdrawals. The 80% probability of success means that in approximately 80% of hypothetical (or simulated) future scenarios, using Monte Carlo simulation techniques, your savings will last as long as you say that you'd like for the money to last.
The calculations are an estimate based on the inputs and assumptions provided and are not a guarantee. The calculations do not take into account costs of fees involved with investment management and do not include taxes. Return and volatility projections are provided by Charles Schwab Investment Management (CSIM) and are estimates not guarantees.
The tool is intended to be an aid and should not be relied on as the only source of information when making a decision. For help, talk with a retirement planning professional or advisor.
Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium® are made available through Charles Schwab & Co. Inc. ("Schwab"), a dually registered investment advisor and broker dealer. Portfolio management services are provided by Charles Schwab Investment Management, Inc. ("CSIM"). Schwab and CSIM are subsidiaries of The Charles Schwab Corporation.