Methodology and Assumptions:

Investment Choice:

The iRetire tool (the “tool”) includes illustrative UBS Managed Portfolio of Funds House View Strategy portfolios (“UBS Strategies” or “portfolios”) with a range of risk levels to select from. The risk level selected may differ from the investor’s risk tolerance. 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 universe of investments available in the UBS Strategies is limited to those exchange-traded funds (“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. 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. Other investments not available in the tool may have characteristics similar or superior to those that are included.

Risk Analytics:

For purposes of determining the risk characteristics of the UBS Strategies, BlackRock analyzes each portfolio’s underlying holdings. For certain holdings within non-iShares ETFs, BlackRock analyzes assigned proxies that BlackRock determines are the most appropriate for the relevant holdings based on the information available to BlackRock using a combination of Morningstar and other publicly available data sources. Neither BlackRock nor the Aladdin portfolio risk model can predict a portfolio's risk of loss due to, among other things, changing market conditions or other unanticipated circumstances. BlackRock’s Aladdin portfolio risk model is based purely on assumptions using available data and any of its predictions are subject to change. Portfolio inputs are typically based on the latest disclosed data, which may be lagged.

Retirement Income Estimate:

The tool takes into account each user's inputs, including 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 risk level. 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 selected portfolio. In order to estimate a portfolio’s assumed return, BlackRock proxies each underlying fund with a market index (or blend of indexes) that is selected by BlackRock based on the fund’s Morningstar Category. All funds in any given Morningstar Category are represented by the same market index. BlackRock’s Long-term Capital Market Assumptions are then applied to the market indexes to calculate the portfolio’s assumed return. Please refer to the Long-term Capital Market Assumptions discussion below for the assumed return and assumed risk figures for a set of sample indexes that are broadly representative of the market. The portfolio’s assumed return is adjusted to account for the underlying funds’ current net expense ratios.

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 appropriate 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 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 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 (28 June 2019):

Long-term capital market assumptions refer to BlackRock's return, risk and correlation expectations for each market index. (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.

 

Index

Annualized
Assumed Return

Annualized
Assumed Risk

 

MSCI USA Index

6.50%

16.04%

 

MSCI World ex USA Index (unhedged)

7.02%

17.43%

 

Bloomberg Barclays U.S. Government Index

2.06%

4.96%

 

Bloomberg Barclays Global Aggregate Treasury Index ex U.S. (unhedged)

1.66%

8.06%

 

Bloomberg Barclays U.S. Credit Index

2.96%

5.77%

BlackRock typically reviews the assumptions quarterly. 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 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 asset allocations based on capital markets assumptions, investors should not rely exclusively on the portfolios 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 investments, the portfolios shown in the tool do not reflect actual trading, liquidity constraints, all applicable fees and expenses, taxes, and other factors that could impact an investor’s realized future returns.

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.