Retirement Income Calculators Differ Widely

An analysis of 12 calculators resulted in a 60% spread in resulting monthly income.

Corporate Insight analyzed the retirement calculators of 12 financial institutions—six of them retirement plan recordkeepers and six not—and despite inputting the same data points for each, found exceptionally different results.

The monthly income projections ranged from a high of $6,013 to a low of $3,772, a 60% spread, and the differences between the monthly income goals were even wider, ranging from a high of $9,029 to a low of $4,892, an 85% spread.

Corporate Insight found six variables that drive the differences in income—taxes, inflation rate, salary growth, Social Security benefits, investment returns and ages—and four differences that drive the variances in income—income replacement ratio, salary growth, inflation rate and taxes.

“While the inputs and assumptions were disconcerting, the action steps suggested, or lack thereof, were equally alarming,” Corporate Insight says in its report, “The Looming Problems With Retirement Planners.” “Ideally, tools should allow users to adjust inputs directly on the results screen that dynamically adjust their retirement income projections.”

Nine of the tools provide a gap analysis, but these, too, vary significantly. “Principal’s tool states that the user will have a monthly income shortfall of $4,597, by far the largest,” Corporate Insight says. “TIAA’s tool projects the lowest income shortfall of $1,120 a month, a whopping 310% less than Principal’s.”

The biggest driver of the income projections is the investment return assumptions, according to Corporate Insight. Some of the calculators don’t allow users to change the returns pre- and post-retirement, three do not account for salary growth, two do not take Social Security benefits into account and one doesn’t take inflation into account. Life expectancies also differ, and only two of the calculators show results post-tax.

The income replacement goal also varied widely: between 85% and 60%. Ten of the calculators provide retirement terminology definitions. Some of the calculators ask users to estimate their state and federal taxes in retirement, rather than asking them to input their zip code and other details that could impact taxes, such as number of dependents and marital status.

Corporate Insight says it is also faulty for some of the calculators to ask people to determine how much savings they will need by the time they retire, rather than a percentage of final income. Two of the calculators show projected income in future dollars, which could lead users to assume they will have more than enough money saved, when that will not be the case. And only a few of the calculators provide actionable advice, rather than promoting the company’s own products. It is also important for users to be able to print the results, so that they can share them with their financial adviser, Corporate Insight says. 

The report may be downloaded from A free registration is required.