Not all retirement income projection tools arethe same.

In fact, the modeling tools, which are becoming default featureson recordkeeping and retail advisory platforms, generate wildlyvarying interpretations of how retirement savings will translate intoincome when the golden years arrive.

A new study from Corporate Insight, a provider of research andanalytics to the financial services industry, surveyed 12income-modeling tools — six from recordkeepers’ platforms, and sixfrom retail advisory providers.

What the company found could call into question the value ofsome modeling tools in their existing form.

Analysts at Corporate Insight created a hypothetical saverprofile: A single, 40-year old male New York resident who makes$100,000 a year and defers 10 percent of his income to a definedcontribution plan, which has a balance of $100,000. His employermatch is 3 percent. His 401(k) is allocated to suit his moderatelevel of risk tolerance, and he anticipates drawing a $1,500 amonth Social Security benefit upon retiring at age 67.

Those factors, and others, were in put into the calculators,with a goal to replace 85 percent of income inretirement.

What came out was a variance in projections that amounted tonearly $30,000 in annual income, in the case of the greatestdiscrepancy.

$6,013 a month vs. $3,772 a month

MassMutual’s Retirement Planner tool, which is part of itsrecordkeeping platform, projected Corporate Insight’s hypotheticalsaver’s monthly income at $6,013. TIAA’s Retirement Advisor tool, apart of its recordkeeping platform, estimated the same input datato generate $3,772 a month.

The average monthly projection for the 12 modeling tools was$4,792.

No two calculators generated the same projected income.

But the Principal’s Retirement Wellness Planner, Prudential’sRetirement Income Calculator, and WealthMSI’s Retirement Planner 1,the tool of the plan rollover specialist that was acquired by DSTin 2015, projected incomes within $88 of one another.

Gap analysis component

Nine of the 12 analyzed tools feature a “gap analysis”component, which compares current retirement income projections toa predetermined income replacement goal.

That analysis — measuring how a investor’s savings tendenciesmeasure against the set goal — provides valuable context to incomeprojection modeling, say Corporate Insight’s analysts, “and shouldbe incorporated into the results of all retirement planning tools,”according to the report. MassMutual, the CalcXML 401(k) incomecalculator, and Capital One’s Retire My Way tool do not offer thegap analysis.

The nine tools that do offer gap analysis base their conclusionson vastly different income replacement rate goals.

For instance, Principal’s tool sets a monthly income replacementgoal of about $9,000 for Corporate Insight’s hypothetical saver,the highest among the tools. TIAA set the lowest monthly incomereplacement rate goal, at about $4,900. The average income goal isset at about $6,600.

6 reasons for variation in the projectionmodels

Corporate Insight identified six factors that led to the widevariation in modeling projections: taxes, inflation rates, salarygrowth, Social Security benefits, investment returns, and age —including expected retirement age and life expectancyassumptions.

Among those variables, assumptions on investment returns werethe greatest reason for the wide discrepancy in projections,according to Corporate Insight.

Some of the calculators only permit one investment returnassumption, meaning income projections don’t account for lowerreturns on less risky portfolio allocations after retirement.

Capital One assumes a pre- and post-retirement return of 7.35percent for investors that select a “moderate” asset allocationstrategy. Its tool projects the third highest monthly income atroughly $5,500, despite the fact it does not accountfor Social Security income orincreased salary deferrals as income grows throughout a saver’scareer.

Principal’s tool assumes a life expectancy of 92 years, and a 7percent pre and post-retirement investment return.

The Merrill Lynch and WealthMSI tools apply more modestpost-retirement return expectations, at 4.7 percent and 4 percent,respectively.

Part of the explanation behind MassMutual’s highest incomeprojection is that the tool provides a non-adjustable SocialSecurity benefit estimator, which offered a high benefit relativeto Corporate Insight’s hypothetical saver’s earnings history, theanalysts said.

Betterment and TIAA’s projection tools offer the lowest incomesat $3,791 and $3,772, respectively, largely because they are theonly among the surveyed calculators to account for taxes andestimate projections in post-tax amounts, Corporate Insight’sreport said.

Takeaways for sponsors andparticipants

While becoming a common feature, income replacement projectiontools are still a relatively novel concept, and are likely toevolve as utilization increases.

Drew Way, senior retirement analyst at Corporate Insight andlead author of the study, said the data suggests sponsors andparticipants need to regard the tools as more of a guide than anexact predictor of retirement income.

“The biggest takeaway from this study is that individuals usingretirement planning calculators need to be mindful that theunderlying assumptions the tools employ can have a profound impacton both the results and the goal recommendations,” Way toldBenefitsPro in an email.

"It's important, then, to at least know the assumptions a toolis using and to understand that it’s not meant to provide a 100percent accurate analysis of an individual's level of retirementreadiness,” he added. "Instead, the tools are meant to give usersan approximation of where they stand with regard to achieving theirretirement goals, and to equip them with the knowledge to then makeappropriate actions to help them achieve those goals.”