How we crunch the numbers
How did we arrive at the numbers you see?
The amount "I have" is, well, what you've told us you've already saved toward your goal. This can be done in one of three ways:
- You manually enter the amounts that you have saved toward your goal. These amounts will not be updated automatically, which means that as balances changes, it will be your responsibility to update that information.
- You can connect your accounts from third-party financial institutions to LINK. The account balances will generally be updated on a daily basis and so will be tracked automatically for you.
- You can connect your Prudential accounts to LINK. This can include your 401(K) or other accounts that you may have at Prudential. The account balances will be updated and tracked automatically for you.
- For additional important information about connecting third-party and Prudential accounts to LINK, click here and here.
How much you'll "need", is "estimated" and your "probable outcome" are a bit more complicated:
For some goals, we gather information from third parties in addition to what you've told us. (Please note that third-party data can change.) Besides your personal information:
- For general investment goals, we use the target dollar amount you provide.
- For education goals, we assume college costs will rise 5% a year, and use either the current reported costs of tuition, room and board for the school you cite or, based on your choices, the average cost for either a public institution in your state, a public institution outside your state or a private institution in or out of your state. (Note that some private schools charge different amounts for students from in and out of their states.)
- For retirement goals, we assume your current annual salary will grow by 2.5% each year until you retire to arrive at your estimated pre-retirement income. We then multiply your estimated pre-retirement income by your selected percentage of pre-retirement income you will need in retirement (80% is selected by default). The resulting figure represents what you may need as income each month during retirement.
- For home goals, we use your expected down payment on a house: We multiply the down payment percentage you provide by the home price you're considering.
- For baby goals, we use the dollar amount you plan to spend; to help guide you, we provide the national average first-year cost of raising a baby for those at your income level and relationship status.
- For car goals, we use the dollar amount you plan to spend.
- For wedding goals, we use the amount you plan to spend and adjust for inflation based upon the amount of time until the event.
- For emergency fund goals, we help guide you by providing a target value based upon your monthly household expenses multiplied by the number of months you specified.
- For life insurance goals, we estimate your projected life insurance needs based on information you provided such as your annual income, household savings and debt, and national-average funeral costs. We also assume 3% general inflation, that college costs will rise by 5% a year, and that your investments will produce average annual gains of 4.5% after taxes.
- For custom goals, we use your specified target amount adjusted for inflation based upon the time horizon.
Note: If you borrow money to buy a home or car, please update your debt balance on your profile; this will update your life insurance goal and needs. If a new baby is your dependent, you should add them to your profile, which will create a new education goal and update your life insurance goal.
How do you derive "Estimated" and "I’ll Probably Have"?
For retirement goal, our calculation for estimated income assumes by default a 6% annual rate of return on investments you have identified for retirement (you can adjust this between 2% and 10%). The same annual rate of return is assumed for all retirement assets, irrespective of how they are held or invested (brokerage account, 401(k), savings, etc.). The estimated monthly income calculated includes an estimated monthly Social Security Benefit based on recent Social Security Administration statistics and benefit formulas. It assumes that benefits when you retire will equal the current Primary Insurance Amount (PIA) for a single individual in a similar situation. In addition, this estimate does not take into consideration any changes to Social Security that may occur. This estimate does not include commissions, bonuses or any other incentive compensation (unless included in your current annual pay). Social Security will not be included if your assumed retirement age is less than 62 or you elected to not include this within the estimate.
For investing goals other than retirement, “I’ll Probably Have” estimates the future value of your assets in the year you aim to complete your goal.
The calculation considers:
- Your "time horizon," based on the year you aim to complete each goal.
- The current savings you have, and contributions you plan to make, toward each goal.
- A constant annual rate of return (this rate is defaulted to 6% but you can adjust the default rate between 2% and 10%). The default rate of return used is hypothetical only and is not based on our expectations for the market or with any knowledge of how your investments are allocated.
IMPORTANT: The projections are hypothetical, do not reflect actual investment results and do not guarantee future results. Our estimates do not consider the underlying investments in any third-party or Prudential accounts you have connected to LINK.