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United States
Workplace Retirement
 * Corporate
 * Personal Investing
 * Workplace Retirement
 * Recordkeeping Sponsor/Consultant

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AGE-BASED RETIREMENT SAVINGS STEPS

VISIT THE EDUCATION LIBRARY FOR AGE-BASED
SAVINGS STEPS.

 

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EDUCATION HUB


WHAT CAN YOU LEARN ABOUT
RETIREMENT TODAY?

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Visit the Education Hub for videos that can help you make the most of your
Plan. 

Visit Education Hub

DEI INITAITIVES


OUR DIFFERENCES BRING US TOGETHER

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We remain committed to providing service and support to participant
communities across the vast array of diverse identities and to celebrating
diversity, equity, and inclusion—both within our firm and in our communities. 

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INVESTMENT SOLUTIONS




Evaluate Funds and Performance

Investing in an IRA

Saving for College

Market Updates

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Our Mission Is Simple.
Help clients around the world achieve their long-term investment goals.



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AGE-BASED SAVINGS GOALS METHODOLOGY AND ASSUMPTIONS

Age-based savings goal ranges are based on a target savings range at an assumed
retirement age of 65, and a savings trajectory over time needed to achieve the
target. In determining age-based savings goal ranges, we assume a savings rate
of 6% at age 25 and increase the savings rate by 1% annually until reaching the
necessary savings rate to achieve the target savings range at retirement. (We
assume 3% of the savings rate is attributable to employer contributions.) While
we believe most people should aim to save at least 15% (including employer
contributions), the necessary savings rate can be higher or lower depending upon
marital status and household income which we assume is between $75,000 and
$250,000 (“Tested Salaries”). Household income grows at 5% until age 45 and 3%
(the assumed inflation rate) thereafter. Investment returns before retirement
are 7% before taxes, and savings grow tax deferred. 



In determining the target savings range at retirement, we assume 4% of assets
will be withdrawn at age 65 (an annual withdrawal rate intended to support
steady inflation adjusted spending over a 30-year retirement). The withdrawal
amount is calculated as the income that we estimate is necessary to support
spending in retirement minus estimated Social Security benefits. (That
withdrawal amount divided by preretirement income equals the “Non-Social
Security Income Replacement Ratio”). The Non-Social Security Income Replacement
Ratio, which varies widely for the Tested Salaries, reflects estimated spending
needs in retirement (including a 5% reduction from preretirement levels); Social
Security benefits (using the SSA.gov Quick Calculator assuming claiming at full
retirement ages and the Social Security Administration's assumed earnings
history pattern); state taxes (4% of income, excluding Social Security
benefits); and federal taxes (based on rates as of January 1, 2019). While
federal tax rates are scheduled to revert to pre-2018 levels after 2025, those
rates are not reflected in these calculations. 



The mid-points of the age-based savings goal ranges are good starting points for
benchmarking your progress, but circumstances vary by person, and over time. The
savings goal ranges cannot guarantee retirement income of any specific amount
and may not be applicable for those with earnings that vary widely from the
Tested Salaries. The assumptions used may not reflect actual market conditions
or your specific circumstances, and do not account for plan or IRS limits. These
savings goal ranges assume you'll be dependent primarily on personal savings and
Social Security benefits in retirement. However, if you have other income
sources (e.g., pension), you may not have to rely as much on your personal
savings, so your savings goal range would be lower. 



The material is provided for general and educational purposes only, and is not
intended to provide legal, tax, or investment advice. This material does not
provide fiduciary recommendations concerning investments or investment
management, nor should it serve as the primary basis for an investment decision.


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Retirement Income Experience and Confidence Number® Methodology and Assumptions

Main

OVERVIEW


The Retirement Income Experience allows retirement savers to estimate the
durability of their current savings across 500 randomly generated market
scenarios, and to assess the impact of different savings rates, time horizons,
and other variables have on the projection of retirement income. The projections
are used to provide retirement income estimates and to calculate a Confidence
Number® score. The Confidence Number® score represents a snapshot of the
likelihood that your retirement savings will be sufficient to generate income
throughout retirement sufficient to meet an assumed or specified Retirement
Income Goal (i.e., spendable, after-tax income).

The projections generated by the tool regarding the likelihood of various
investment outcomes are based on historical performance data of specific asset
classes as described below, but are hypothetical in nature, do not reflect
actual investment results, and are not guarantees of future results. The tool
presents only a range of possible outcomes. There can be no assurance that the
projected or simulated results will be achieved or sustained. The potential for
loss (or gain) may be greater than demonstrated in the simulations. Results may
vary with each use or over time, depending on changes to your inputs or periodic
updates to the underlying assumptions. See "Limitations".

1. DATA USED AND HYPOTHETICAL PROJECTION METHODOLOGY

Data and Assumptions about You. In order to determine how likely your current
and projected retirement savings are to last through retirement, we use data and
assumptions about you, as follows.

 * The tool automatically imports (1) your workplace plan balances; (2) your
   balances in cash balance plans, other retirement plans, or HSA Investment
   balances that are not recordkept by T. Rowe Price but may have been provided
   by your employer; and (3), any personal investment accounts held at T. Rowe
   Price other than those designated for college savings. You may also provide
   data about outside investment accounts. Any external investment accounts that
   you have linked through the account aggregation service powered by Envestnet
   Yodlee are also automatically included in the tool’s projections.
 * We use the Morningstar® asset classes to determine your current allocation
   and categorize them as stocks, bonds, or short-term bonds. Any percentage of
   holdings classified by Morningstar as "other" has been assigned to short-term
   bonds.
 * We use salary information you or your employer has provided, a retirement age
   of 65 (unless you have specified a different age), and we assume you will
   need savings to last through age 95 (unless you have specified a different
   age). If you are over age 65, then we assume a retirement age of your current
   age plus 1-year.
 * We use your current contribution rate (and apply any scheduled automatic
   increases) to project future contributions. In most cases, we will also
   incorporate your company’s employer contribution formula(s) (including
   matching contributions) and eligibility criteria (if applicable). As an
   alternative, we may use the employer contributions that you receive over the
   last 12 months as your starting annual employer contribution amount. (If you
   have less than 12 months of contribution data, we use the data available as
   your annual contribution, and this may understate the estimate). We do not
   project contributions to nonqualified deferred compensation plans.
 * We assume you will make contributions until your retirement age.
 * To estimate your salary growth, the projection uses Morningstar’s proprietary
   "salary growth curve." This curve takes into account the fact that salaries
   tend to grow most rapidly for young employees, peak when someone is in their
   50s and then slightly decline later in life.
 * We assume you will receive Social Security benefits beginning at age 70
   (unless you have specified a different age), which we estimate based on your
   projected salary to your retirement age. We assume Social Security benefits
   will increase at a rate to keep pace with inflation (assumed to be 3% based
   on historical inflation rates).
 *  Your Retirement Income Goal (i.e., spendable, after-tax income) is
   determined by estimating the percentage of your projected salary at
   retirement required to maintain your lifestyle in retirement. This amount is
   based on your spending needs. Higher withdrawal amounts may be necessary due
   to withholding requirements or the need to pay taxes. To calculate your
   Retirement Income Goal, we subtract certain estimated taxes (state, federal,
   and employment taxes) and any regular contributions made to your account(s)
   from your projected salary at retirement. You may customize your retirement
   income goal by entering a different amount.

Calculating Hypothetical Future Values. The tool uses Monte Carlo analysis to
generate 500 hypothetical market scenarios so that users can analyze
hypothetical outcomes for specific asset class portfolios under a range of
market conditions. (Asset classes used are limited to stocks, bonds and
short-term bonds). Monte Carlo analysis provides ranges of potential future
outcomes based on a probability model. Monte Carlo analysis creates potential
simulated portfolio values by using asset class portfolio returns selected
randomly from a consistent data set comprised of 400,000 potential annual return
values. These rates account for the historical returns of the Representative
Indices from the Index Data Start Date noted in the chart to 2016.

 

     Stocks    Bonds    Short-term Bonds    Long-term Compound Annual Rate of
Return    8.3%    5.0%    3.8%    Representative Index    S&P 500    Bloomberg
Barclay U.S. Aggregate Bond*    Barclay 1-3 Year Gov't Credit    Index Data
Start Date    January 1960    January 1960*    February 1976

 

*IA SBBI Intermediate Government from January 1960 to December 1975. Bloomberg
Barclay U.S. Aggregate Index since January 1976. 

These returns do not reflect fees and expenses or the effects of inflation. 

We assumed a variability of returns based on historic volatility data from
market indices:

 

       Stocks    Bonds    Short-term Bonds    Annual Volatility    15.0%    6.0%
   4.4%


Finally, we assumed that returns of each asset class would move in correlation
to the other asset classes in a manner consistent with historical experience as
follows:

 

     Stocks    Bonds    Short-term Bonds    Stocks      0.3    0.2    Bonds  
 0.3       0.8    Short-term Bonds    0.2    0.8    1

 

The correlation (which can range from -1.0 to 1.0) indicates how much the assets
move in tandem. The closer the value is to 1.0 indicates the higher the tendency
the assets have to move in the same direction. 

We use the assumptions above for all taxable and tax-deferred accounts. Unless
you are invested in a T Rowe Price retirement date investment, the projections
assume that your asset allocation will remain static (i.e., we do not assume
that you will gradually reduce your equity exposure over time, making your
portfolio more conservative).

Estimating Taxes. Tax rules are applied throughout the tool’s simulation
process, including required minimum distribution (RMD) rules that apply to some
tax-deferred accounts. The tool estimates your federal, state income, and
capital gains taxes based on the current federal and state tax tables. The tool
uses your salary data, as well as any income data provided for your
spouse/partner, to estimate federal and state tax exposure when performing
simulations and proving retirement income estimates.

Taxable Account Modeling. For taxable accounts, the tool estimates annual taxes
on yield and capital gains when performing simulations and providing retirement
income estimates. To compute taxes on yield, the tool determines if the yield is
in the form of an equity dividend or a fixed income coupon. Federal dividend tax
rates are applied to equity dividends and federal marginal ordinary income tax
rates are applied to fixed income coupons. To compute capital gain taxes, the
tool first calculates the assets that need to be sold each year when performing
projections. Then the long-term capital gain rate is applied to these estimated
realized capital gains on the assets sold.

Retirement Income Projections and Withdrawal Assumptions. In order to calculate
your retirement income estimates and your post-retirement plan balance, we use
the 80th percentile from the 500 hypothetical return projections. We provide an
income projection for both your current strategy as well as any modeled
strategy. Our monthly and annual retirement income estimates show spendable,
after-tax amounts that succeed in at least 80% of the market simulations (i.e.,
leave at least $0.01 in the Plan at the end of retirement),  and are displayed
in today's dollars (unless noted otherwise). Projected retirement plan balances
are displayed in future dollars.

We assume withdrawals necessary to achieve your Retirement Income Goal from the
80th percentile, pro rata, across asset classes. We build into the withdrawal
assumptions Morningstar’s proprietary U-shaped “retirement spending curve”,
which includes expectations about consumption throughout retirement; namely,
expenditures tend to decrease for retirees throughout retirement and then
increase toward the end.

We assume that required minimum distributions from employer sponsored retirement
plan balances and non-Roth IRA accounts begin at age 73 and are made in annual
payments. To the extent Social Security payments, pension benefits, and/or
required minimum distributions exceed your estimated spending needs, we assume
the amounts are reinvested in a taxable account (and we use the return
assumptions above that apply to short-term bonds).

In withdrawing to meet your Retirement Income Goal, we assume a specific
withdrawal sequence from account types. We start with any required minimum
distributions. We then move to taxable accounts (if any), followed by
tax-deferred accounts. With tax-deferred accounts, we assume withdrawals will
come first from nonqualified deferred compensation accounts (if any), followed
by after-tax sources and accounts (e.g., non-deductible IRAs), and then pre-tax
sources and accounts. Finally, we withdraw from any tax-free Roth sources within
your employer sponsored retirement plan(s) and then Roth IRA accounts.

Savings and Retirement Age Strategy Modeling. We’ve estimated a total retirement
plan contribution rate and retirement age that will help improve your chances of
achieving your Retirement Income Goal throughout retirement. If you’re enrolled
in auto increase, we account for those annual increases in our calculations. We
encourage you to explore different contribution increases and retirement ages to
model the impact on your estimates and projections. Any suggested contribution
modeling increases will default to pretax until you reach the IRS contribution
limit and then to after-tax (if available). If your plan offers Roth deferrals,
you can model the impact of Roth changes.

If multiple retirement plans are modeled, the plan with the greatest employer
match contribution is prioritized, then the plan with a lower match is utilized.
When match is maximized in each plan, suggested contribution modeling increases
are then prioritized based on the plan with the higher account balance. 

Confidence Number® Score. The hypothetical projections are used to determine
your Confidence Number® score. This number is calculated on a 100-point scale.
The basis of the Confidence Number® is the Simulation Success Rate, which is a
probability measure and represents the percentage of times outcomes succeed in
providing the target retirement income goal each year in the analysis.

Retirement Income Over Time Chart. This graph represents the various sources of
income in retirement. Your workplace plan account(s), any personal retirement
accounts held at T. Rowe Price, and any other T. Rowe Price or outside
investment accounts that you’ve added are used to generate the estimates shown
in the "Savings" portion of the graph. The "Pension" portion of the graph
provides an income estimate from any applicable workplace pension plan, or other
pension amounts that you’ve added. The “Social Security” portion of the graph
represents an estimate of Social Security benefits based on your assumed or
stated claiming age. Estimated taxes have been taken out of Social Security and
any applicable pension amounts. Higher withdrawal amounts may be necessary from
your savings due to withholding requirements or the need to pay taxes. 

Optional Variables. The following optional variables can be added for a more
holistic view of your retirement income projection and Confidence Number® score.

 * Spouse's income.
 * Spouse’s retirement age (we assume your spouse’s retirement will end the same
   year as yours).
 * Spouse’s estimated social security benefit. We assume your spouse will
   receive social security benefits beginning at age 70 (unless you have
   specified a different age), which we estimate based on your spouse’s
   projected salary to retirement age. We assume that you or your spouse will
   receive the larger of the spousal benefit or individual benefit to which you
   or your spouse are entitled to when claiming social security benefits.
 * Other T. Rowe Price accounts (in addition to personal retirement accounts),
   and outside investment accounts (including accounts belonging to your
   spouse). You may specify an annual savings amount for these accounts which
   will be included in our projections.
   
   If you include or change any of these variables, you must ensure the
   information is current and accurate in the future. The only values
   automatically updated are those imported using the Envestnet Yodlee
   aggregation capabilities.
   
   2. LIMITATIONS
   
   While Confidence Number® score and the Retirement Income Experience have been
   designed with reasonable assumptions and methods, the tool provides
   hypothetical projections only and has certain limitations.
   
   * Failure of the model to accurately project actual market conditions,
     inflation, salary growth, future account contributions or tax rates may
     result in over- or understatement of projected retirement savings and
     income projections.
   * IRS contribution and compensation limits are subject to annual cost of
     living increases, which the tool does not estimate. Projected future
     contributions may be subject to higher limits than used in our estimates,
     which (in some cases) may result in understatement of retirement savings
     and income projections.
   * Any information you manually enter in the tool will need to be updated by
     you to accurately reflect any changes in your profile, savings and
     investing data..
   * Salary information provided by you or your employer may differ from the
     compensation used to calculate plan contributions and/or Social Security
     benefits and may result in over- or understatement of retirement savings
     and income projections.
   * If your salary information includes salary bonuses, the variability of
     bonuses may result in over- or understatement of retirement savings/income
     projections. Similarly, if you are eligible for bonuses which are not
     included in your salary information, the tool's projections, including the
     estimate of your retirement income goal, may be understated.
   * The use of projected future salary to estimate Social Security payments may
     not represent your situation.
   * The assumption that Social Security payments will increase by the amount of
     assumed inflation (3%) may result in overstated retirement income
     projections.
   * If you aggregate spousal data, we assume that both you and your spouse will
     only need income through the end of your retirement. If your spouse lives
     longer than your assumed or stated retirement end date, there may not be
     sufficient savings to support your spouse’s retirement income goals
     following your death.
   
   The information provided in this tool is for general and educational purposes
   only, and is not intended to provide legal, tax or investment advice. This
   tool does not provide fiduciary recommendations concerning investments or
   investment management. Other T. Rowe Price educational tools or advice
   services use different assumptions and methods and may yield different
   outcomes. If you wish to receive a personalized financial plan, please seek
   the advice of a licensed personal financial planner.
   
   IMPORTANT: The projections or other information generated by the Retirement
   Income Experience regarding the likelihood of various investment outcomes are
   hypothetical in nature, do not reflect actual Investment results, and are not
   guarantees of future results. The simulations are based on assumptions. There
   can be no assurance that the projected or simulated results will be achieved
   or sustained. The charts present only a range of possible outcomes. Actual
   results will vary with each use and over time, and such results may be better
   or worse than the simulated scenarios. Clients should be aware that the
   potential for loss (or gain) may be greater than demonstrated in the
   simulations.

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expenses, and other information that you should read and consider carefully
before investing.


Download a prospectus or summary prospectus


This website has been prepared by T. Rowe Price Retirement Plan Services, Inc.,
for general and educational purposes only. This material does not provide
recommendations concerning investments, investment strategies, or account types.
It is not individualized to the needs of any specific investor and is not
intended to suggest that any particular investment action is appropriate for
you, nor is it intended to serve as the primary basis for investment
decision-making. T. Rowe Price Retirement Plan Services, Inc., its affiliates,
and its associates do not provide legal or tax advice. Any tax-related
discussion contained in this website, including any attachments/links, is not
intended or written to be used, and cannot be used, for the purpose of (i)
avoiding any tax penalties or (ii) promoting, marketing, or recommending to any
other party any transaction or matter addressed herein. Please consult your
independent legal counsel and/or tax professional regarding any legal or tax
issues raised in this material.





 



Schwab Personal Choice Retirement Account® (PCRA) is offered through Charles
Schwab & Co., Inc. (Schwab), a registered broker-dealer that also provides other
brokerage and custody services to its customers, Member SIPC.



 




Confidence Number and FuturePath are trademarks of T. Rowe Price Group, Inc.



©2023 T. Rowe Price. All Rights Reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE,
and the Bighorn Sheep design are, collectively and/ or apart, trademarks of T.
Rowe Price Group, Inc. RETIRE WITH CONFIDENCE is a trademark of T. Rowe Price
Group, Inc.



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