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What does the Income Score represent?
What does the Income Score represent?

This article describes the Income Score, its use in interpreting your plan, and that we are not applying a 4% withdrawal in your plan.

Nancy Gates avatar
Written by Nancy Gates
Updated over a week ago

The Income Score represents the ratio of total retirement income to total retirement expenses in your plan. A score over 100 means that more than 100% of the time your income is greater than expenses. The income score could therefore have no upper limit. If you had just $1 of income in retirement, but no expenses, your "score" would be positive infinity. Scores over 81 mean you are in good shape. If your score is under 80, you might need to make changes to your expenses, savings, or other areas.

Your estimated average retirement income is based on your earnings from Work, Passive, Social Security, Annuity and Pension sources from retirement age to longevity age plus a “safe” 4% savings drawdown rate. The amount is shown in today’s dollars.

NOTE: We are not applying a 4% drawdown of your accounts. The referenced 4% withdrawal is only used for these estimations and provided as a means of assessing your overall standings.

Your estimated average retirement expenses are based on the expenses you enter in your plan, under the inflation assumptions in your plan, and the other items we calculate such as income taxes and IRMAA given your plan specifics such as marital status, savings drawdowns, and deductible expenses.

In the above plan we see that Average Income in retirement is $13K.

We divide that by $11K Average Expenses in retirement.

We see that the ratio is 1.18, resulting in an Income Score of 119.

What are some issues that might skew my Income Score?

Lump-Sum Inheritance

Lump-Sum inheritances are not included in retirement income as they are entered as after-tax additions. They can alter the ratio of Income to Expenses and sometimes cause the score to drop because there are tax expense increases in the future while income stays the same. Unfortunately this is due to a limitation with the Score's ability to judge tax liability. Basically, Optimistic scenarios usually incur a higher tax liability within the plan when compared to Pessimistic scenarios. In certain plans this is over-exaggerated and causes a lower score.

How should I use the Income Score in my plan analysis?

Income Score is one perspective, or statistic, of the many available in the Planner. We always recommend that you view your plan's health from a holistic lens, taking into consideration multiple projections and figures including the Income Score, Chance of Success, Monte Carlo Analysis, Net Worth, charts available in the Insights Library as well as your level of comfort with any risk and complexity your plan entails.

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