Methodology and Assumptions:

Portfolios: The iRetire tool (the “tool”) generates illustrative portfolios based on each user's inputs, taking into account the investor's current age, retirement savings, any anticipated Social Security, pension, annuity or earned income, planned spending for the next 1 (to 5) year(s), and the risk level selected in the tool. The risk level selected may differ from the investor’s risk tolerance. This information is intended to provide potential investment options, but is not comprehensive investment advice. An investor’s retirement needs may be influenced by a variety of factors that are not included in this analysis. Investors should consult with their advisors to help evaluate their retirement needs and consider the information provided by the tool.

The portfolios generated by the tool and the underlying exchange-traded funds (“ETFs”) for each portfolio are determined by UBS based on the UBS Managed Portfolio of Funds House View Strategies (the “UBS Strategies”). The UBS Strategies available in the tool broadly reflect the types of core equity and fixed income exposures that are commonly included within diversified portfolios. The UBS Strategies are analyzed using BlackRock’s multi-factor methodology based on the risk and return characteristics of five basic asset class exposures (U.S. equity, non-U.S. equity, U.S. rate (bonds), non-U.S. rate (bonds) and U.S. credit risk). The universe of eligible investments considered by the tool is limited to those ETFs available on the UBS platform that UBS, in its sole discretion, designates as appropriate to be included in the UBS Strategies. BlackRock has no authority or discretion to modify the asset allocations or the ETFs included in the UBS Strategies. Other asset classes and investments not considered in the UBS Strategies may have characteristics similar or superior to those included in the tool.

For purposes of determining the risk and return characteristics of the UBS Strategies, BlackRock evaluates the risk characteristics of the underlying holdings of specific iShares ETFs, in the case where iShares ETFs are included in the UBS Strategies. For all other ETFs, BlackRock evaluates the underlying holdings of the benchmark index that BlackRock determines is the most appropriate proxy for the relevant ETF based on the information available to BlackRock.

Retirement Income Estimate:

The Retirement Income Estimate is meant to represent a potential annual retirement income amount. It is assumed that the investor withdraws from his or her portfolio until age eighty-five, at which point the investor’s projected portfolio balance would allow him or her to purchase an annuity that would generate annual income within the estimated range shown for the remainder of the investor’s life. The Retirement Income Estimate is calculated with this ending balance in mind and is intended to allow for such an annuity purchase at age 85.

The Retirement Income Estimate represents a projected range of annual retirement income derived by first growing the investor’s current retirement savings from now until the year the investor turns eighty-five by the assumed return of the portfolio shown. The assumed return of the portfolio is calculated using each applicable asset class's assumed return. Please refer to the Long-term Capital Market Assumptions discussion below for the assumed return and assumed risk figures for each asset class.

Next, the investor’s projected portfolio balance at age eighty-five is divided by the corresponding projected CoRI value in order to calculate an average Retirement Income Estimate. The “low” and “high” estimates reflect the assumed volatility (risk) of the components of the portfolio, as well as the assumed volatility (risk) of lifetime income costs as measured by BlackRock’s CoRI methodology. Income estimates using CoRI methodology include an annual cost of living adjustment. CoRI values are updated daily, so results may vary with each use and over time. CoRI estimates are not guaranteed. Please refer to the CoRI methodology discussion below for more detail.

Once the investor’s initial low, average and high annual retirement income estimates are calculated, the investor’s anticipated annual income from Social Security and other sources (such as a pension or a previously purchased annuity) is then added to each estimate. The tool calculates the estimate of annual income from Social Security including an annual cost of living adjustment. Other sources of income are not adjusted for cost of living. Investors should consult with their advisors on whether they included the right amount of retirement income from these sources. Added together, these values give the investor a total Retirement Income Estimate as well as his or her low and high values.

The investor has several additional “levers” available to him or her that may, alone or together, result in changes to his or her low, average, and high annual retirement income estimates.

  • The advisor may change the investor’s Planned Annual Spending for the first few (1-5) years of retirement. The first month’s planned spending amount is assumed to be unavailable for investment in the portfolio. The first month’s planned spending is calculated by taking the annual spending amount the advisor indicated for the first 1-5 years of the investor’s retirement and dividing by twelve. The tool then reduces the investor’s Current Retirement Savings by this amount and recalculates the investor’s Retirement Income Estimate accordingly. Such annual income estimates are assumed to begin after the investor’s selected period of planned spending, which can range from 1 to 5 years in the future.
  • The advisor may also include Expected Earned Income that the investor anticipates receiving annually in the first 1-5 years of retirement. This income will first be applied to the investor’s Planned Annual Spending, if entered, otherwise it is applied to the investor’s Retirement Income Estimate. The tool assumes that any Expected Earned Income in excess of Planned Annual Spending is invested in the portfolio and grown over time. The investor’s Retirement Income Estimate will be adjusted accordingly, taking into account the additional earned income in the short-term (1-5 years).
  • Lastly, the investor may be interested in purchasing a new stream of annual retirement income from an annuity that would be funded using a portion of his or her Current Retirement Savings. The investor’s Retirement Income Estimate will adjust to reflect the potential impact of this purchase, which is based on the hypothetical purchase of a single premium immediate annuity (SPIA). Depending on your client’s particular risk factors and coverage needs, your client may not be able to obtain coverage at a cost similar to the estimated cost. If you are not a licensed agent, you will have to consult with a licensed agent for further information which may include purchasing other types of annuities. The annuity cost and corresponding income are estimated using BlackRock’s CoRI methodology. Please refer to the CoRI methodology discussion below for more detail.

These annual retirement income estimates are generated using Monte Carlo simulation, which is a statistical modeling technique that forecasts a set of potential retirement future outcomes based on the variability or randomness associated with historical occurrences. These estimates are projections based on the probability or likelihood of generating a particular level of retirement income. These figures include a range of Retirement Income Estimates, showing a low and high value at a 68% confidence level. This reflects a 68% probability that an investor's estimated annual retirement income will fall within the range shown. Projections are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. No representation is made that an investor will achieve results similar to those shown. Actual retirement income could be higher or lower based upon a number of factors and circumstances not addressed herein.

CoRI Methodology:

CoRI values and BlackRock’s CoRI methodology refer to BlackRock’s process for estimating today's cost of generating each dollar of future annual lifetime income in retirement. A CoRI value is designed to reflect a “fair” theoretical market price for lifetime retirement income. In the marketplace, lifetime retirement income can be purchased through investable vehicles in the bond and insurance markets. Accordingly, CoRI values take into account interest rates, inflation expectations, life expectancy and other factors, using criteria similar to those relied on by sophisticated pension plans and insurers. Projected CoRI values are estimated based on these factors as well as forward-looking interest rate expectations, which are derived using a model that considers a number of empirical factors to determine a long-term view of interest rates. This view then helps estimate an expected future cost of lifetime retirement income.

CoRI estimates are not guaranteed. A number of factors may contribute to variations in retirement income. For example, the CoRI methodology does not reflect the fees, expenses and cost that may be associated with an annuity or any other retirement income product that an individual may purchase, nor does it reflect any assumption that such a product will be available for purchase at any point during the investor’s retirement.

Long-term Capital Market Assumptions (Q3 2017):

Long-term capital market assumptions refer to BlackRock's 10-year return, risk and correlation expectations for each asset class. (Correlation measures how asset classes move in relation to each other). UBS has its own long term capital market assumptions  which are used in Financial Goals Analysis (FGA) and to construct the asset allocations of the UBS Strategies. The tool uses BlackRock's capital market assumptions which may differ from the UBS capital market assumptions. These assumptions are based on historical asset class returns (as reflected by certain indices), proprietary models, BlackRock's subjective assessment of the current market environment and forecasts as to the likelihood of future events.

Asset Class

Benchmark

Annualized Assumed Return

Annualized Assumed Risk

U.S. Equities

MSCI USA Index

5.92%

15.62%

Non-U.S. Equities

MSCI World ex USA Index

6.48%

18.14%

U.S. Rates

Bloomberg Barclays U.S. Government Index

2.66%

4.94%

Non-U.S. Rates

Bloomberg Barclays Global Aggregate Treasury Index ex U.S. 

2.49%

8.30%

U.S. Credit

Bloomberg Barclays U.S. Credit Index

3.69%

5.92%

 Assumed return is calculated as the expected amount of return generated by the corresponding level of risk for each asset class, plus a short term U.S. Treasury bill investment return. U.S. and non-U.S. equity return is estimated based on the historic correlation between equity valuations and long term returns. U.S. credit return is estimated based on the additional yield that has historically been generated over equivalent maturity treasuries provided by corporate bonds, net of potential losses stemming from worsening credit quality. U.S. and non-U.S. rate return is calculated based on the relative yields of long term government bonds in those markets.

BlackRock typically reviews the assumptions quarterly. Long-term capital markets assumptions are subject to high levels of uncertainty regarding future economic and market factors that may affect actual future performance. There is no guarantee that the capital market assumptions will be achieved, and actual returns could be significantly higher or lower than those shown. Capital market assumptions should not be relied on as a forecast or prediction of future events, and they should not be construed as guarantees as to returns that may be realized in the future from any investment or asset class described herein. Ultimately, the value of these assumptions is not in their accuracy as estimates of future returns, but in their ability to capture relevant relationships and changes in those relationships as a function of economic and market influences.

Because of the inherent limitations associated with the use of illustrative portfolios based on capital markets assumptions, investors should not rely exclusively on the asset allocations, portfolios or funds shown in the tool when making an investment decision. The illustrative portfolios cannot account for the impact that economic, market, and other factors may have on an actual investment portfolio. Unlike actual portfolios, the asset allocations shown in the tool do not reflect actual trading, liquidity constraints, fees, expenses, taxes and other factors that could impact an investor’s realized future returns.

Past performance is no guarantee of future results.

Asset Classes/Risk Premiums:

Risk premium is defined as the return above a very low risk investment in short term U.S. Treasury Notes.

U.S. Equities are based on the MSCI USA Index, which is designed to measure returns and risk associated with U.S. equity related investments.

Non-U.S. Equities are based on the MSCI World ex USA Index, which is designed to measure returns and risk associated with non-U.S. equity related investments.

U.S. Rates are based on the Bloomberg Barclays U.S. Government Index, which is designed to measure returns and risk associated with U.S. sovereign bond related investments.

Non-U.S. Rates are based on the Bloomberg Barclays Global Aggregate Treasury Index ex U.S., which is designed to measure returns and risk associated with non-U.S. sovereign bond related investments.

U.S. Credit is based on the Bloomberg Barclays U.S Credit Index, which is designed to measure returns and risk associated with U.S. credit related investments.

The past performance of an index is not a guarantee of future results. Each index reflects an unmanaged universe of securities without any deduction for advisory fees or other expenses that would reduce actual returns, as well as the reinvestment of all income and dividends. An actual investment in the securities included in the index would require an investor to incur transaction costs, which would lower the performance results. Indices are not actively managed and investors cannot invest directly in the indices. Asset allocation and diversification strategies do not guarantee a profit and may not protect against loss. The two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. Non-investment-grade debt securities (high-yield/junk bonds) may be subject to greater market fluctuations, risk of default or loss of income and principal than higher-rated securities. An investment in any strategy identified in the tool is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency and their return and yield will fluctuate with market conditions. International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. These risks often are heightened for investments in emerging/developing markets or in concentrations of single countries. Investing in small-cap companies may entail greater risk than large-cap companies, due to shorter operating histories, less seasoned management or lower trading volumes.