*All calculations made using mortality rates from the Society of Actuaries RP-2014 mortality tables for healthy annuitants using a 50/50 blend of male and female mortality and ISG capital market forecasts for Q2/2018. The median life-expectancy at age 65 in these tables is 86. Drawdown assumptions include a 2% cost of living adjustment (COLA) and a retirement age of 65.
Self-managed drawdown: we assume the participant has all their retirement assets in a 35/65 portfolio with an expected return of 4.5% and a risk level of 5.5%. The drawdown rate is the annual rate at which a participant could draw down their assets with a 95% probability of not exhausting their assets during their lifetime.
Hybrid: we assume the participant uses 25% of their retirement assets to purchase a 50% joint and survivor annuity with a return of premium benefit and a 2% COLA which starts payments at age 80 and invests the remainder of the assets in a 35/65 portfolio with an expected return of 4.5% and a risk level of 5.5%. The hybrid drawdown rate is the continuous annual rate at which the participant could draw down their assets between the ages 65 and 80 and use the remainder of their assets to supplement their annuity income after the age of 80. The drawdown rate is the annual rate at which a participant could draw down their assets with a 90% probability of not exhausting their assets during their lifetime. A higher shortfall risk is assumed for the hybrid solution because of the backstop of annuity payments at age 80.
Annuity: The drawdown rate is the annual payment that the participant would receive if they used all their retirement assets to purchase an immediate 50% joint and survivor annuity with a 2% COLA starting payments at age 65. Calculations for the self-managed drawdown and the drawdown portion of the hybrid solution are based on simulations (simulation count = 100,000) and do not reflect the effects of unforeseen economic and market factors on decision-making. Annuity prices are based on indicative institutional quotes for April 2018. Expected returns are based upon estimates and reflect subjective judgments and assumptions.
The views expressed in this material are the views of SSGA Defined Contribution as at March 20, 2020, and are subject to change based on market and other conditions.
This document contains certain statements that may be deemed forward looking statements. Please note that any such statements are not guarantees of any future performance, and actual results or developments may differ materially from those projected.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. Investing involves risk, including the risk of loss of principal. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
SSGA Target Date Funds are designed for investors expecting to retire around the year indicated in each fund’s name. When choosing a Fund, investors should consider whether they anticipate retiring significantly earlier or later than age 65 even if such investors retire on or near a fund’s approximate target date. There may be other considerations relevant to fund selection and investors should select the fund that best meets their individual circumstances and investment goals. The funds' asset allocation strategy becomes increasingly conservative as it approaches the target date and beyond. The investment risks of each Fund change over time as its asset allocation changes.
Diversification does not ensure a profit or guarantee against loss.
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Exp. May 31, 2021