Life Path Spending Methodology and Assumptions:

Estimated Spending and Estimated Spending Range:

Estimated Spending and Estimated Spending Range represent a projection of the amount of income a retiree, aged 63 to 95, could spend annually with the goal of maintaining a consistent level of spending throughout retirement.  Estimated Spending is derived using the Current Age and Current savings input by the user.

Current Savings is assumed to be invested in a 40% U.S. Large Cap Equities (indexed to the MSCI USA Index) and 60% U.S. Investment-Grade Bonds (indexed to the Bloomberg Barclays Aggregate Bond Index) portfolio. Please refer to the Long-term Capital Market Assumptions discussion below for the assumed return and assumed risk figures of each asset class.

The tool also assumes the user is already in retirement and therefore not collecting labor wages and does not factor in required minimum distributions, which are set by the IRS, or any taxes that may incur.  

Estimated Spending and Estimated Spending Range projections are calculated using a Monte Carlo simulation, which is a statistical modeling technique that forecasts a set of potential future outcomes based on the variability or randomness associated with historical occurrences. These projections are based on a number of factors including the Current Age and Current Savings inputs by the user, longevity assumptions, risk aversion assumptions, long-term capital market assumptions, and asset class risk premium assumptions (Each assumption is discussed in greater detail below).

The Estimated Spending Range shows a low and high value at a 68% confidence level. This reflects a 68% probability that the annual Estimated Spending projection will fall within the Estimated Spending Range shown.

Year-over-year, this estimated amount will vary based on changing age, remaining current savings balances, and updated assumptions described above.

This information is provided for educational purposes only and is intended to provide current retirees between the ages of 63 and 95, with an estimated spending amount and range based on their current age and current savings, but is not individualized investment advice. A retiree’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.

Estimated Spending and Estimated Spending Range are projections based on the probability or likelihood of generating a particular level of retirement income.  Projections are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results.  Actual retirement income could be higher or lower based upon a number of factors and circumstances not addressed herein.

All retirement spending estimates are pre-tax.

Asset Allocation:

In order to help address the risk of premature depletion of one’s Current Savings, we assume all Current Savings entered in the tool are invested in a portfolio of 40% of a broad basket of securities covering the U.S. Large Cap Equities market (represented by the MSCI USA Index), and 60% in a diversified portfolio of U.S. Investment Grade Bonds, representing the entire U.S. rates and credit market (represented by the Bloomberg Barclays Aggregate Bond Index).

Other investments not considered may have characteristics similar or superior to those that are identified in this tool. 

Longevity Assumptions:

‘Longevity risk’, the risk that a retiree will outlive their savings, is one of the greatest sources of risk any retiree faces and can complicate retirement savings decisions.

To reflect the probability of being alive at a given age, the tool utilizes the Annuity 2000 mortality (life) tables, published by the American Society of Actuaries. While these tables project life expectancy until age 115, the tool is designed for use only up to age 95.

Risk Aversion Assumptions:

Risk aversion controls how retirees value the tradeoff between potential spending power (higher returns) for certainty of outcome (lower risk). This drives the risk (and therefore level of equity exposure) in the assumed 40% U.S. Large Cap Equities and 60% U.S. Investment-Grade Bonds portfolio and impacts estimated spending and estimated spending range. The tool assumes a moderate risk aversion resulting in a ratio of 40/60 between U.S. Large Cap Equities and U.S. Investment Grade Bonds utilized in the tool, as proxied by the indices below.

Long-term Capital Market Assumptions (Q1 2017):

Long-term capital market assumptions refer to BlackRock's return, risk and correlation expectations for each asset class. (Correlation measures how asset classes move in relation to each other). 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


Assumed Return

Assumed Risk

U.S. Large Cap Equities




U.S. Investment Grade Bonds

Bloomberg Barclays Aggregate Bond Index



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. equity return is estimated based on the historic correlation between equity valuations and long term returns. U.S. fixed income return is estimated based on two risk and correlation expectations, the U.S. credit return and the U.S. rate return. 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. rate return is calculated based on the relative yields of long term government bonds in those markets.

Within the tool, these assumptions are updated at the beginning of each calendar year to be in line with BlackRock’s LifePath Retirement Spending methodology. Long-term capital market 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.

Past performance is no guarantee of future results.  Indexes are unmanaged and one cannot invest directly in an index.

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.

U.S. Fixed Income is based on the Bloomberg Barclays Aggregate Bond Index, which is designed to measure returns and risk associated with U.S. investment grade bond related investments.

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.