WO2001053975A1

WO2001053975A1 - Retirement evaluation and recommendation system

Info

Publication number: WO2001053975A1
Application number: PCT/US2001/001829
Authority: WO
Inventors: John A. Rekenthaler; David L. Harrell; Martha Dustin Boudos; Paul D. Kaplan; Robert C. Wamsley
Original assignee: Morningstar Associates, Llc
Priority date: 2000-01-21
Filing date: 2001-01-19
Publication date: 2001-07-26
Also published as: AU2001227962A1

Abstract

A retirement evaluation and recommendation system includes a multiple step process for evaluating a user's current financial situation and retirement income range, and for making specific recommendations to the user. The system obtains the user's information regarding the user's biographical information, current investments (16) and retirement plan, calculates potential plans for the user to achieve the desired and acceptable retirement income goals (14), enables a user to input the user's retirement income range (18); enables the user to select a retirement investment plan (20), runs the user through a test of the selected retirement investment plan (20), makes specific recommendations for the user's investments (22) and provides the user with an action list for the user to follow (24).

Description

RETIREMENT EVALUATION AND RECOMMENDATION SYSTEM

COPYRIGHT NOTICE A portion of the disclosure of this patent document contains material which is subject to copyright protection. The copyright owner has no objection to the photocopy reproduction of the patent document or the patent disclosure in exactly the form it appears in the Patent and Trademark Office patent file or records, but otherwise reserves all copyright rights whatsoever.

DESCRIPTION

The present invention relates in general to a retirement evaluation and recommendation system, and in particular to a retirement evaluation and recommendation system which provides users with specific advice regarding the users' financial retirement planning and investments based upon the users' current financial and retirement information.

BACKGROUND OF THE INVENTION Many corporations and other employer's provide their employees with retirement saving programs such as 401 (k) plans. To utilize such programs, the employees must make decisions on how to invest the retirement funds saved through these programs. This can be a difficult decision for the employees. To intelligently make such decisions without assistance, the employees should fully understand their investment options, the differences in the available investments and their retirement goals. The employees should also have knowledge of the economic forces that will affect their retirement incomes and be knowledgeable about many other factors. Unfortunately, many employees do not have this knowledge, understanding, investment experience or time to educate themselves. This problem is compounded by the fact that for many employees, their retirement funds are their primary source of savings. Accordingly, employees and their employers justifiably worry if the employees are making appropriate retirement savings investment decisions and whether the employees will be able to retire in a suitable fashion.

Certain systems have been provided to help employees make investment and retirement investment decisions. U.S. Patent No. 5,918,291 , and PCT Application Nos. PCT/US98/19920, PCT/US98/19952, PCT/US98/06693 and PCT/US98/06694 describe commercially available systems which are designed to assist employees in making retirement investment decisions. However, these systems require the employees to provide information, such as the desired level of risk, which is often difficult for the employees to determine. These systems do not focus the employee on the employee's potential range of retirement income (taking into account downside or bear market results). Accordingly, there is a need for a system which assist employees in making retirement investment and planning decisions such as choosing between different asset mixes, including specific mutual funds, stocks, bonds and money funds to enable the employee to reach an obtainable retirement income range.

SUMMARY OF THE INVENTION The retirement evaluation and recommendation system of the present invention provides a user or an employee of an organization with specific retirement planning and investment recommendations based on the user's desired or acceptable retirement income range. The retirement evaluation and recommendation system of the present invention is referred to herein for brevity as the "system" or the "retirement system." The system gathers information about the user's current situation and retirement goals, calculates whether the user is on track to meet his or her retirement goals, identifies the changes the user could make to have a better chance at reaching the user's retirement goals, tests the user's short-term risk tolerance with realistic loss scenarios, recommends specific 401 (k) investments that balance with the user's other retirement assets, and provides the user with a detailed action list of what to do to achieve the user's retirement goals. The system may be adapted to be implemented on and accessed through the internet or through an organization's intranet or extranet.

The first step of the retirement system of an embodiment of the present invention is to ask the user to state the user's expectations for income at retirement. Previous retirement-planning systems implicitly treat this stage as unimportant, by defaulting to an arbitrary ratio of a hypothetical figure (e.g., 70% of the user's estimated salary prior to retirement). Such systems give the user little encouragement or opportunity to address the fundamental question of retirement, which is "What will my life be like?" If the goal is incorrect, the plan that the system provides is incorrect. Requiring the user to think about and specify the user's retirement income goals or range dramatically improves the odds that the plan will be successfully implemented. Top financial planners have long understood this and have spent a good deal of time having their clients articulate their views of the future. Most previous retirement-planning systems did not make such an attempt.

More specifically, one embodiment of the system asks two questions about the user's retirement income goals. The system asks the user his or her desired retirement income (i.e., "What income would you like to receive each year in retirement?"). The system also asks the user his or her acceptable retirement income (i.e., "But if things don't work out as planned, how much would you settle for?"). This two-goal approach permits the system to communicate with the user in terms of range of retirement income. By thinking of a range of retirement income, the user is focused on the long- term dangers associated with a riskier portfolio, as well as the potential upside of a higher return. In addition, asking for two goals or a range of retirement income reinforces the message to the user that forecasting future income levels is a matter of probabilities, not an absolute certainty.

The system also provides information for the user if the user has trouble answering questions or is uncertain of what the user's retirement income needs might be. For instance, the system preferably offers resources for assisting the user to set his or her retirement income targets. Such resources outline general rules of thumb for estimating retirement income needs and provide information on lifestyles corresponding to various retirement income ranges.

The system focuses on long-term risk rather than short-term risk. Most prior asset-allocation programs seek the optimal portfolio for a specified level of short-term volatility (i.e., daily or monthly changes in the value of the user's portfolio). The present system seeks the portfolio that is most likely to achieve a long-term objective which meets or exceeds the user's targeted range of retirement income. The system also pays attention to short-term risk, as discussed below, only after addressing the larger, more important risk to the user of not meeting the user's long-term goals.

In an alternative embodiment, the retirement evaluation and recommendation system of the present invention provides a user with specific retirement planning and investment recommendations based on the user's current information and desired retirement range. This embodiment of the present invention does not initially ask the user for the user's expectations for income at retirement. This embodiment of the system gathers information about the user's current financial, retirement and biographical information including the user's retirement balance and savings rate, calculates at least one range of income the user is on track to obtain, identifies the changes the user could make to have a better chance at obtaining higher or lower retirement goals, enables the user to specify specific retirement income ranges after providing the calculated range of income for the user based on the user's information, tests the user's short- term risk tolerance with realistic loss scenarios, recommends specific 401 (k) investments that balance with the user's other retirement assets, and provides the user with a detailed action list of what to do to achieve the user's retirement goals.

In a further alternative embodiment of the present invention, the system provides recommended percentages of investments in each asset class instead of specific investment recommendations.

It should be appreciated that all of the values in the system of the present invention are preferably in constant dollars to adjust for future inflation and to avoid problems of asking the user to forecast inflation or make conversions between real and nominal quantities.

It should also be appreciated that several of the figures include one or more of the following trademarks which may be used by the assignee of this application: (a) MORNINGSTAR; (b) CLEARFUTURE; (c) MORNINGSTAR

CLEARFUTURE; (d) JAKE; (e) MAGGIE; (f) JAKE Designs; (g) MAGGIE

Designs; (h) TEST FLIGHT; (i) ANSWER MACHINE; (j) WHAT IF; and (k)

CONTROL ROOM. It should be appreciated that these trademarks are not part of the system of the present invention. It is therefore an advantage of the present invention to provide a retirement evaluation and recommendation system.

A further advantage of the present invention is to provide an improved retirement evaluation and recommendation system which provides users with specific advice regarding the users' financial retirement planning and investments based on the users' current financial, retirement and biographical information.

Other objects, features and advantages of the invention will be apparent from the following detailed disclosure, taken in conjunction with the accompanying sheets of drawings, wherein like numerals refer to like processes, steps, components and parts.

BRIEF DESCRIPTION OF THE DRAWINGS Fig. 1A is a high-level flow diagram illustrating the retirement evaluation and recommendation system of the present invention; Fig. 1 B is a schematic diagram of the system;

Fig. 1C is a flow diagram illustrating the plan selection process of the system;

Fig. 1 D is a table of the financial information provided by the user; Fig. 2 is an illustration of a user log-in interface of the system of the present invention;

Fig. 3 is a welcome interface provided to the user by the system; Fig. 4 is an illustration of the retirement income goal setting interface of the system; Figs. 5A, 5B, 5C and 5D are illustrations of the current financial situation input interfaces of the system;

Figs. 6A, 6B, 6C, 6D, 6E, 6F, 6G, 6H, 61, 6J, 6K and 6L are illustrations of the plan selection and tool interfaces of the system; Figs. 7A, 7B, 7C and 7D are illustrations of the test interfaces of the system;

Figs. 8A, 8B and 8C are illustrations of the investment recommendations interfaces of the system;

Figs. 9A and 9B are illustrations of the action list interfaces of the system;

Figs. 10A and 10B are a high-level flow diagram illustrating an alternative embodiment of the retirement evaluation and recommendation system of the present invention;

Fig. 10C is a flow diagram illustrating an alternative embodiment of the plan selection process of the system of the present invention;

Fig. 11 is an illustration of the initial information gathering interface of an alternative embodiment of the system of the present invention;

Figs. 12A, 12B, 12C, 12D, 12E and 12F are illustrations of the financial information or situation input interfaces of an alternative embodiment of the system of the present invention;

Figs. 13A, 13B, 13C, 13D and 13E are illustrations of the plan selection and tool interfaces of an alternative embodiment of the system of the present invention;

Figs. 14A, 14B, 14C and 14D are illustrations of the test interfaces of the alternative embodiment of the system of the present invention;

Figs. 15A, 15B, 15C and 15D are illustrations of the investment recommendation interfaces of the alternative embodiment of the system of the present invention;

Figs. 16A, 16B, 16C, 16D, 16E, 16F and 16G are illustrations of the action list interfaces of the alternative embodiment of the system of the present invention; and Figs. 17A, 17B, 17C, 17D and 17E are illustrations of the recommendations interfaces of the alternative embodiment of the present invention.

DETAILED DESCRIPTION OF THE INVENTION

Referring now to the drawings, and in particular to Fig. 1A, an embodiment of the retirement evaluation and recommendation system of the present invention, generally indicated by numeral 10 and referred herein for brevity as the "system" or the "retirement system," includes a multiple step process for evaluating the user's current situation and retirement income goals, and for making specific recommendations to the user. Generally, after the user logs onto 12 the system 10, the system 10: (i) obtains the user's desired and acceptable retirement income goals or range 14; (ii) obtains information regarding the user's current investments and retirement plan 16 (including 401 (k) plan); (iii) calculates potential investment plans for the. user and enables the user to select a retirement investment plan 18; (iv) runs the user through a test of the selected retirement investment plan 20; (v) makes specific recommendations for the user's investments 22; and (vi) provides the user with an action list for the user to follow 24. After using the system 10, the user exits 26 the system 10.

The system architecture is generally illustrated in Fig. 1 B. The system 10 preferably has a multi-tier system, including a raw securities data server 30, statistical processing systems 32, a processed securities data server 34, a client data server 36, an archival data server 38, one or more computational model servers 40 and one or more presentation servers 42. All of the components of the system communicate via communications links, which could be a high-speed network, a modem, or other telecommunication devices. In this manner, the system can be coupled with other resources that can be used to provide data for the computational model server 40. The raw securities data is preferably compiled from many data feeds. This data is processed preferably, on a monthly basis, by a suitable combination of statistical systems to produce analytically useful data. Once the raw securities data has been processed and verified, it is placed onto the processed securities data server 34 which is a standard relational database management system (RDBMS).

The client data server 36 is an RDBMS that stores all information needed by the computational model server 40 that the end user has provided. These include, but are not limited, to the state of the end user's finances, the funds that are available in the end user's defined contribution savings plan, the end user's preferences for types of funds and the end user's tolerance to risk and volatility. The client data server 36 also performs archival functions, storing historical data from the client in the archival data server 38.

An end user of the system uses the client 44, which could be a web browser, or other standalone application to interact with the presentation server 42 using the Hypertext Transfer Protocol (HTTP). The client 44 provides data that is needed by the computational model server 40. This data is verified by a routine on the computational model server 40 before being stored in the client data server 36.

The computational model server 40 aggregates the data from the processed securities data server 38 and the client data server 36. This data is used to perform forecasting of potential returns for the end user. The computational server 40 also selects funds from the end user's portfolio to meet the returns given the end user's tolerance of risk and volatility. The computational model server 40 then displays these results using the presentation server 42 to format the data for display using HTML which is then transferred to the client 36 via HTTP. Referring now to Fig. 2, a user may access the system using a conventional computer by entering the system URL in a standard internet access browser or intranet/extranet access device. The system is adapted to be used by the employees of a plurality of organizations or through a public website. In the first embodiment, the system is accessed by an employer or user through the intranet of the user's employee or organization. The system displays a login interface 50 which requires the user to enter the appropriate pre-assigned or predetermined company code, user name and password. In such case, the system will know the user's organization and will not need to obtain a company code from the user. Each organization has a specific 401 (k) plan or other retirement plan which provides the user with a plurality of investing options. For instance, the organization's plan may provide the user with relatively safe investment options, moderately safe investment options and aggressive investment options. The employees of the organization must choose how their investment savings will be divided among or invested in each of the options. Most often the options are mutual funds which have differing investment strategies.

When the system implementer and an organization agree that the system implementer will provide the organization's employees with access to the system, the system implementer will obtain the necessary information from the organization regarding the organization's 401 (k) plan, and other relevant information. The system implementer may additionally obtain specific information including current investments for all of the organization's users from the organization. The system implementer will add the organization's 401 (k) or other retirement investment options to the system's database. This enables the system to make specific recommendations based on the specific investment options available to the individual users.

If the system is implemented on a publicly available data network such as the internet, the system will preferably be set up with suitable defaults or ask the user to input the necessary information.

Referring now to Fig. 3, the system provides a welcome interface 60 to the user. This interface 60 generally describes the system, what the system does, how long it will take the user to use the system and how the user can begin to use the system. The system preferably provides other information to the user such as general information regarding the system such as a glossary, general investment information and a more detailed explanation of how the system works. These tools or resources are accessible through the various interfaces provided by the system. The welcome interface may require the user to select the user's 401 (k) plan, or another organization's 401 (k) plan. Setting Retirement Income Goals or Range (Step 1) Referring now to Fig. 4, one embodiment of the system provides an interface 70 enabling the user to initially set or input the user's retirement income goals or range. In particular, this interface 70 enables the user to input the user's name, date of birth, year of birth and whether the user is a male or a female. The system also asks the user to determine whether the system will include information regarding the user's spouse or partner (if applicable).

The interface enables the user to input a desired annual retirement income goal, level or amount 72 that the user would like to receive each year in retirement and an acceptable annual retirement income goal, level or amount 74 that the user would settle for in retirement. The system enables the user to access resources or information to help the user determine these retirement income goals, levels or amounts. This retirement income goal or range approach is relatively easy for the vast majority of users to understand because it is not based on general knowledge about the marketplace, the risk of investments, the type of investments or any other economic conditions. It is simply based on the individual knowledge of what the user would like to receive in income each year in retirement and what the user would settle for in each year of retirement. The retirement system of the present invention uses these two retirement income goals throughout the interaction with the user, for evaluating the user's current situation and for making specific recommendations for the user to achieve the retirement income goals or range provided by the user. In certain cases, the system as discussed below will ask the user to re-adjust the user's retirement income goals or range because it may be impossible or improbable for the user to achieve the initial retirement income goals or range provided by the user based on the user's current financial situation. The system also enables the user to input the amount in the user's estate that the user desires to leave descendants, a charity or the like. The system stores this user imputed information in the appropriate system databases as described previously. Current Financial Situation Information Gathering (Step 2) Referring now to Figs. 1 D, 5A, 5B, 5C and 5D, the system 10 provides interfaces 80A, 80B, 80C and 80D which enable the user to input more detailed information regarding the user's current financial situation, and particularly the user's current retirement investments. If the system is not pre-loaded with this information from the user's organization, the user is asked to input the user's: (a) annual salary; (b) desired retirement age; (c) spouse's or partner's salary (if applicable); (d) spouse's or partner's desired retirement age (if applicable); (e) if the user is willing to take a part-time job during retirement, and if so, the estimated annual income from the job and the number of years the user is willing to work during retirement; and (f) if the user wants to use the system's suggested annual Social Security amount or the annual amount the user thinks he or she will receive from Social Security.

The system also obtains 401 (k) information from the user if the system is not preloaded with this information from the user's organization. Specifically, as partly illustrated in Fig. 5B, the system enables the user to input: (a) the maximum percentage of the user's salary allowed by the 401 (k) plan; (b) the percentage of user's salary the user is contributing or will contribute to his or her 401 (k) plan; (c) the breakdown of the user's employer's matching funds; (d) if the company's matching contribution is in the form of company stock; (e) the current amount in the user's 401 (k) plan; (f) the amount, if any, of assets in the user's 401 (k) plan that is invested in company stock; (g) if the user has an existing loan against the user's existing 401 (k) plan, and if so, the payment period and the date the loan will be paid off; (h) whether the user plans to take a future loan on the user's 401 (k) assets, and if so, the amount of the loan, the date the user will begin to pay the loan off, and the number of years the user will need to pay the loan off; and (i) whether the user will receive a pension from user's current employer, and if so, the amount the user will receive annually and the date the user will begin to receive the payment. A list of the information the system preferably obtains is provided in Fig. 1 D. The system also inquiries whether the user has a spouse or partner. If the user has not already entered the spouse's or partner's information, the system enables the user to input all the spouse's or partner's relevant information (if applicable). The system also determines if the user or the user's spouse or partner (if applicable) have: (i) other 401 (k) accounts; (ii) traditional IRA's; (iii) Roth IRA's; (iv) variable annuities; (v) brokerage accounts; (vi) company stock held outside 401 (k) plan; (vii) other pension plans; or (viii) funds from selling the user's primary residence. For investment vehicles (i), (ii), (iii), (iv) and (v), the system enables the user to input the details of the investment or simply enter the overall balance of the investment and any current annual contribution that the user makes to it. It should be appreciated that the system could be adapted to prompt the user to input a variety of different or additional information as desired by the system implementer. The system stores this information in the appropriate system databases.

Picking a Plan (Step 3) Referring now to Figs. 1C, 6A, 6B, 6C, 6D, 6E, 6F, 6G, 6H, 61, 6J, 6K and 6L, the system makes a series of calculations 18a as described below to determine a range of expected lump-sum values for the user's portfolio at retirement. This determination is based on the inputs the user provided in Steps 1 and 2 as well as the system implementer's own forecasts for return, risk (measured by standard deviation), and correlation (the degree to which it moves in tandem with other assets) for each of the three major asset classes (i.e., stocks, bonds and cash). The system calculates portfolio values based on a plurality of different asset allocations (which range from 0% stock to 100% stock) using the mathematical model described below, sometimes referred to as a lognormal distribution.

The system then uses an annuity calculation to translate the expected lump sums into a range of projected retirement incomes. The system uses published mortality tables to determine how an annuity provider might price an annuity that would pay a certain constant dollar amount each year as long as the user or the user's spouse were living ^'oint and survivor annuity). The calculation of the potential range of retirement incomes also takes into account Social Security, income from a part-time job during retirement, income from defined-benefit retirement plans, cash freed up by moving into a smaller home after retirement, and one spouse's salary after the other has retired (if applicable). It should be appreciated that the system could take into account other factors as desired by the system implementer.

If the user specifies an estate goal, the system determines the amount of money which would have to be set aside at the beginning of the user's retirement to be a percent (preferably 50%) certain of obtaining the desired estate goal by the time both the user and the user's spouse or partner (if applicable) are likely to have died. This amount is deducted from the user's lump-sum retirement assets before the annuity calculation is performed.

The desired and acceptable figures are calculated for each of the possible asset allocations. The system preferably estimates that there is a 50% chance of meeting or exceeding the desired retirement income goal and the system preferably estimates that there is a 95% chance of meeting or exceeding the acceptable retirement income goal.

If both the desired and acceptable retirement income figures exceed the retirement income goals that the user's inputted in Step 1 , as illustrated in Figs. 1C and 6A, the system provides interface 90A which displays 18b to the user one or more plans with asset mixes of stocks, bonds and cash that are likely to meet both of the user's stated retirement income goals. For each plan, the system displays the achievable retirement income range 91 , a comfort prediction 92, and an asset mix 93. The user can select the plan that the user finds most attractive. The system preferably presents the plans in the context of their relative short-term volatility (i.e., smooth, moderate and bumpy).

However, the user's goals may not match the user's current situation, as illustrated in interface 90 in Figs. 1C and 6B. If the system cannot immediately meet the user's goals, the system will display 18C up to three potential plans that have lower retirement income ranges 91. Each plan shows a range of retirement income 91 which the user can achieve using the plan, the comfort prediction 92 and the asset mix 93 which the user will need to achieve each plan. If the range of retirement income, comfort prediction and asset mix in a plan is acceptable to the user, the user can accept one of the plans and move to the next step of testing the plan. The system thus enables the user to lower the user's retirement income expectations and accept more realistic retirement income targets income or retirement range. If the user is unwilling to accept the retirement income range provided by any of the plans, the system enables the user to change the user's retirement investment strategy. The system preferably offers two tools 18d and 18e to help the user find a solution as discussed below. The system provides the user with a first tool 18d as illustrated in Figs. 1C, 6C, 6D and 6E which enables the user to input the specific changes to the user's investment strategy to enable the system to create a plan that meets the user's retirement income goals. The system also provides a second tool as illustrated in Figs. 1C, 6H, 61, 6J and 6K for enabling the user to explore alternative retirement income ranges if the user changes his or her retirement age, savings rate or other factors.

The first tool, referred to as "Answer Machine" in Figs. 6C, 6D and 6E in a current embodiment of the present invention of the assignee, provides an interface 90C which prompts the user to rank his or her willingness to change the listed parameters to bring the user's goals in-line with a suitable financial plan. This tool also suggests that certain parameters will have a bigger effect than others (e.g., desired retirement age and desired retirement income). This tool preferably enables the user to rank certain variables such as: (i) desired retirement age; (ii) annual 401 (k) contribution; (iii) outside contribution; (iv) desired retirement income; (v) minimum retirement income; (vi) the number of years employee willing to work a part time job; (vii) the annual income expected from a part-time job; (viii) the amount that the user wishes to leave to his or her estate; (ix) the partner's 401 (k) contribution (if applicable); or (x) the partner's desired retirement age (if applicable).

In one embodiment of the present invention, interface 90C includes one or more blocks and a list of variables. The interface 90C enables the user to move (i.e., point, click and drag) the blocks 94A and 94B as indicated in Figs. 6D and 6E to the boxes adjacent to the desired variables. This enables the user to select which variables the system should vary to select a plan for the user which will accomplish the user's retirement income goals or range. Based on the user's input using this tool, the system determines if there is a suitable plan for the user to meet its retirement income goals by reasonably adjusting the selected variables.

As illustrated in Fig. 6F, the system provides an interface 90F which preferably sets forth three plans which show the desired income ranges 91 , the comfort prediction 92, the asset mix 93 necessary to achieve those ranges and the changes 95 that the user must make in his or her current retirement plans or investment strategy to obtain these retirement income goals 91. The first tool 18D thus asks the user to indicate the users flexibility on various factors, so that the system can recalculate and find a plan that meets both of the user's income goals. For example, if the user indicates flexibility on retirement age, years worked at a part-time job, and annual 401 (k) contribution, the system will seek solutions by changing these variables. For instance, the system may calculate that by working two additional years, taking on a part-time job for four years, and increasing the 401 (k) contribution by 2%, the user can meet both of the user's previously stated retirement income goals. The system preferably determines some workable solution, if by no other means than by decreasing the user's retirement income goals. In some cases, no reasonable solution can be achieved, and the system will ask the user to indicate flexibility on other factors. The system also enables the user to use the second tool 18E to experiment with the different plans as further illustrated in Figs. 6G, 6H, 61, 6J and 6K. If the user wants greater control over the user's situation, the user may opt for the second tool. Unlike the first tool 18D which figures out an alternative plan for the user, the second tool 18E lets the user experiment. As illustrated in interfaces 90G and 90K, the user can manipulate a plurality of variables such as: (i) retirement age; (ii) spouse's or partner's retirement age (if applicable) (Fig. 6K); (iii) 401 (k) contribution; (iv) spouse's or partner's 401 (k) contribution (if applicable) (Fig. 6K); (v) outside contributions; (vi) spouse's or partner's outside contribution (if applicable) (Fig. 6K), etc. to instantly see how these changes play out on the various portfolio mixes and to see the change to the range of retirement income. The second tool 18E is referred to as the "What If? Tool" in Figs. 6G, 6H, 61, 6J and 6K in the current embodiment of the present invention of the assignee. In one embodiment of the system, interface 90G has a control panel 96 and a graph 97 of the acceptable income goal and the desired income goal. The interface 90G enables the user to change (i.e., by pointing, clicking and dragging) the user's retirement age, 401 (k) contribution, outside contribution, years of working part-time during retirement, the estate amount, the future 401 (k) loan amount and the loan start years and loan length. By changing these factors, the user can see in the graph 97 how the user's range of retirement income can change based upon the user's asset mix. The graph 97 includes a plurality of vertically arranged asset mixes ranging from no stocks (at the bottom) to all stocks (at the top). As illustrated in Figs. 6G, 6H, 61 and 6J, this interface 90G of the second tool 18E illustrates that as the amount of stock in the asset mix increases, the fluctuation in the user accounts goes from smooth to moderate to bumpy. For each asset mix with more stock, the range of achievable income is wider. Although not shown, this tool also indicates preferably by color the asset mix necessary to achieve the user's retirement income goals.

The user can also change the user's acceptable retirement income goal and desired retirement income goal by horizontally moving the vertical bars (representing these retirement income goals) which will change these goals upward or downward, respectively. Fig. 6J specifically illustrates how the user can change these retirement income goals. Fig. 6K specifically illustrates an enhanced control panel 96 for changing spouse or partner information. It should be appreciated that the system could display the information provided by the second tool in a horizontal fashion.

If the user selects a plan using the second tool 18E after changing certain variables, the system enables the user to save the adjusted variables. The system will then calculate and display preferably three plans for the user using the adjusted variables.

If the retirement system finds a plan that meets the user's goals using the information entered, the system prompts the user to choose one of three different plans 18F and provides as illustrated in Fig. 6E. After the user selects a plan, the system provides an interface 90L which requires the user to confirm the plan selected as illustrated in Fig. 6L.

Testing the Plan (Step 4) Referring now to Figs. 7A, 7B, 7C and 7D, after the user agrees to a plan, the system provides a series of interfaces, such as interface 100A, 100B and 100C, which direct the users through a series of tests to see if the user is comfortable with the plan that the user selected. This is the point at which short-term volatility, the daily, weekly, or monthly ups and downs of the user's investment portfolio, comes into play. Although the system focuses first and foremost on the longer-term risk of not meeting the user goals, the user's tolerance for short-term risk and the user's ability to remain with the user's investment plan are important for the user to achieve the retirement income goals or range. The system preferably uses easy-to-understand graphs to demonstrate to the user multiple real-world loss scenarios for the user's chosen investment plan over pre-determined periods of time such as three- month, one-year and two-year time horizons. For instance, the different risk scenarios could include: (i) a three-month "loss" scenario, (ii) a one year "loss" scenario; and (iii) a two-year "loss" scenario (1973-74 classic "bear market" scenario). Each of these scenarios has happened before and could very likely happen again. After each scenario, the system preferably asks the user whether the user can be comfortable with that kind of loss or whether the user would like to select a less-aggressive investment plan. If the user indicates he or she is not comfortable with the plan, the system will show the user a more comfortable plan as illustrated in Fig. 7C and returns to step 3. If the user thinks the user can be comfortable with the type of losses that the user experiences in the test as illustrated in Fig. 7B, the system moves on to a "handshake" interface 100D as illustrated in Fig. 7D. This interface requires the iser to promise to remain with the investment strategy even if the user's portfolio suffers losses similar to those shown in test.

Investment Recommendations (Step 5) Referring now to Figs. 8A, 8B and 8C, the system provides investment recommendation interfaces 110A and 11 OB for the user to understand the investment recommendations provided by the system. The system preferably seeks to build portfolios where the stock portfolio recommended to the user is made up of the following: (a) U.S. stocks with a large-growth investment style; (b) U.S. stocks with a large-value investment style; (c) U.S. stocks with a small-cap-growth or mid-cap-growth investment style; (d) U.S. stocks with a small-cap-value or mid-cap-value investment style; and (e) international stocks. For U.S. securities, these allocations are preferably based on a suitable equilibrium model where the system assumes that stock-market valuations are broadly correct and that in most cases a prudent investor should not greatly over or underweight a particular style of stock, such as large or small, value or growth. When fitting mutual funds into the portfolio, the system preferably analyzes the underlying holdings of each fund and how they can affect the overall portfolio. The system's database preferably has data on every holding in every mutual fund, and thus the system does not have to treat a fund as a one-note investment. For example, a fund consisting primarily of large-growth stocks wouldn't necessarily be considered 100% large growth. In reality, the fund might be 94% stocks and 6% cash, the 94% stock position might be 86% U.S. and 8% foreign, and the 86% U.S. position might be 61% large growth, 14% large value, and 11% small growth. In creating its portfolios, the system preferably considers all of this information (as well as any other information deemed relevant by the system implementer), so that the resulting portfolio is as accurate as possible.

The retirement system selects a set of mutual funds in the user's organization 401 (k) plan that presents the best chance for achieving the user's retirement income goals. The system preferably: (i) ranks all investment choices by percentage of the overall portfolio; (ii) informs the user that it filled the asset mix with best available funds; (iii) informs the user that it balanced the portfolio with stocks, bonds and cash; and (iv) informs the user that it diversified the portfolio to give it a variety of investment styles and stock sectors.

For each suggested fund, the retirement system preferably displays to the user: (i) an indication of the funds overall quality; (ii) the fund's percentage of the overall portfolio; (iii) the fund's asset allocation (i.e., stocks versus bonds versus cash); (iv) the fund's investment style in (%) of large value, large growth, small value, small growth, and international; and (iv) the fund's key industry sectors (e.g., technology, health, industrials, financials, energy, etc.). For each suggested fund, the system may be adapted to enable user to view more detailed information about the fund by choosing to link to the system implementer's website or another website where such information is accessible.

After enabling the user viewing the fund information, the retirement system preferably asks the user to accept the portfolio. If the user does not accept the portfolio, the system enables the user to specify preferences that the system will attempt to use as much as possible to produce a new suggested set of mutual funds. In the preferred embodiment, the preferences that the user may specify include: (i) the preferred number of funds to include in the portfolio; (ii) whether the user has a preference for including index funds or actively managed funds; (iii) whether the user has a preference for including funds from a particular family; and (iv) the user may choose particular individual funds. The system uses these preferences to select the appropriate funds available to the user.

Action List (Step 6) Referring now to Figs. 9A and 9B, the system provides the user with interfaces 120A and 120B which provide the user with an action list of everything the user needs to do to implement the recommended retirement plan. The action list provide specific changes or actions the user must take to implement the plan including changes to the user's investment choices, savings rates and the like. The user can print the action list which is preferably designed to encourage immediate user response. The action list also preferably includes an explanation that will subsequently remind the user of the reasoning behind the user's decision.

If the user accepts the recommended investment portfolio, the retirement system action list preferably provides: (i) the % allocation of money that currently exists in the user's 401 (k) by fund; (ii) the % allocation of money invested after implementing the plan in the user's 401 (k) by fund; (iii) reminders for the user to visit his or her 401 (k) plan to make the changes; (iv) reminders for the user to make sure that his or her 401 (k) contribution rate is set to the % entered into the system; and (v) reminder for the user to return to the system in six months so that the system can evaluate user's portfolio progress. The action list also preferably recaps the user's: (i) personal information; (ii) retirement income goals or range; (iii) current financial situation; (iv) savings information; and (iv) other retirement assets. It should be appreciated that the action list could provide other information to the user, as desired by the system implementer.

Alternative Embodiment

It should be appreciated that some users may be apprehensive about predicting or are unable to meaningfully predict what income they would like to or need to receive in retirement without being given specific guidance, information or some range or base range of income achievable based on their current financial position. Accordingly, an alternative embodiment of the present invention enables users to input their information, or the system to obtain the users' information without the users initially inputting their acceptable and desirable income goals or retirement income range. This alternative embodiment enables users to obtain an initial retirement income range achievable based on their current information and to use that range to further determine or adjust their achievable retirement income range, their acceptable and desirable income goals and a plan for achieving such goals. The user can thus review the range provided by this alternative embodiment of the system and use that information to make an intelligent or informed decision regarding selecting a plan to achieve their acceptable and desired retirement income goals. The alternative embodiment therefore helps the user determine one or more retirement plans for the user based on their current financial, retirement and biographical information.

More specifically, the alternative embodiment of the retirement evaluation and recommendation system of the present invention, generally indicated by numeral 1000 as illustrated in Figs. 10A and 10B, includes a multiple step process for evaluating the user's current situation and making specific recommendations to the user, similar to that described above. Generally, after the user logs onto the system 1000 as indicated by oval 1012, the system: (i) obtains the user's biographical information as indicated by block 1014; (ii) obtains information regarding the user's current investments and retirement plan (including 401 (k) plan) as indicated by block 1016; (iii) calculates potential investment or retirement plans for the user and enables the user to select a retirement investment plan as indicated by block 1018 which includes enabling the user to adjust or input an alternative retirement income range based on the income range provided by the system and then enables the user to select a plan; (iv) runs the user through a test of the selected retirement investment plan as indicated by block 1020; (vi) makes specific recommendations for the user's investments as indicated by block 1022; and (vii) provides the user with an action list for the user to follow as indicated by block 1024. After using the system 1000, the user exits the system as indicated by block 1026.

Current Biographical Information Referring now to Fig. 11 , the system provides an interface 1070 for enabling the user to input his or her biographical information 1073 used to determine a retirement plan for the user. In particular, this interface 1070 enables the user to input the user's name 1073A, date and year of birth 1073B and whether the user's gender 1073C. The system also asks the user to determine whether the system will include information regarding the user's spouse or partner 1075 (if applicable), including requesting information about the spouse's name 1075A, the spouse or partner's date and year of birth 1075B and whether the spouse is a male or a female 1075C.

Current Financial Situation Information Gathering

Referring now to Figs. 1 D, 12A, 12B, 12C, 12D, 12E and 12F the alternative embodiment of the system provides interfaces 1080A, 1080B, 1080C, 1080D, 1080E and 1080F which enable the user to input detailed information regarding the user's current financial situation, and particularly the user's current retirement investments as described with respect to Figs. 5A through 5D. The user is asked to input the user's annual salary, desired retirement age, spouse's or partner's salary (if applicable) or illustrated in Fig. 12A, employer savings plan information as indicated in Fig. 12B, other investments as illustrated in Fig. 12C, investment balances as illustrated in Fig 12D, company stock information (if applicable) as illustrated in Figs. 12E and 12Fand other relevant information if desired by the system implementor. As discussed above, the system can also obtain much of the users information from the user's employer or databases containing the user information.

Picking a Plan - Determining an Achievable Range Referring now to Figs. 10C, 13A, 13B, 13C, 13D and 13E the system makes a series of calculations based on the user information as indicated by block 1018A in Fig. 10C (similar to the calculations described previously and as described below) to determine a range of expected lump-sum values for the user's portfolio at retirement. This determination is preferably based on the inputs the user provided (or which the system otherwise obtained about the user) in the first two steps of the alternative embodiment as well as the system implementer's own forecasts for return, risk, and correlation for each of the three major asset classes (i.e., stocks, bonds and cash). It should be appreciated that the system of the present invention could employ alternative asset mixes or an alternative number of assets. For example, the system could base its determinations on five asset classes including U.S. large-cap stock, U.S. mid/small-cap stock, international stock, bonds and cash. The system calculates portfolio values based on a plurality of different asset allocations (which range from 0% stock to 100% stock) using the mathematical model described below. It should be appreciated that the system could provide these values to the user as retirement income ranges as discussed in more detail herein or alternatively in lump sum values.

In this alternative embodiment, the system provides interface 1090A which displays to the user one or more plans with asset mixes of stocks, bonds and cash as illustrated in Fig. 13A and indicated by block 1018B in Fig. 10C. For each plan, the system displays the achievable retirement income range 1091 , a comfort prediction 1092, and an asset mix 1093. The system preferably presents the plans in the context of their relative short- term volatility (i.e., smooth, moderate and bumpy). If one of these plans are acceptable to the user, the user can select the acceptable plan. The alternative embodiment enables the user to use a modified first tool and a second tool 1018D and 1018E, respectively, as indicated by Fig. 10C to modify the retirement plans. The first tool provided by interface 1090B and illustrated in Fig. 13B is a modification of the first tool described above which enables the user to input a retirement income range 1077 that the user would like to achieve each year during retirement. The system thus provides a user who is uncertain about the user's acceptable and desirable income goals with three different ranges as illustrated in Fig. 13A which the user can then use to determine the user's desirable and acceptable retirement income goals and ultimately a retirement plan. In the preferred embodiment, the retirement income range 1077 includes an annual retirement income goal, level or amount 1072 that the user would like to receive each year in retirement and an acceptable annual retirement income goal, level or amount 1074 that the user would settle for in retirement. The first tool also enables the user to provide adjustments 1075 as illustrated in Fig. 13B and as described about with respect to the first tool.

This alternative embodiment makes determining the desired retirement income range comprehensible for any user. The user uses the proposed retirement plan information illustrated in Fig. 13A (which is determined using the using the user's current information and situation,) as a basis for determining their desired income range and ultimately their retirement plan.

If the user uses the first tool to adjust the income range, based on the user's inputs to the first tool, the system determines if there is a suitable plan for the user to meet his/her retirement income goals. The system provides an interface 1090F which preferably sets forth three plans which show the income ranges 1091 A, achievable based on the user's adjustments, the comfort prediction 1092A, the asset mix 1093A necessary to achieve those ranges and the changes 1095A that the user must make in his or her current retirement plans or investment strategy to obtain these retirement income goals 1091 A. The modified first tool 1018D thus asks the user to indicate the users' flexibility on various factors, including retirement income goals so that the system can recalculate and preferably find a plan that meets both of the user's income goals.

The alternative embodiment of the system also provides a second tool as illustrated in Fig. 13D, which enables the user to explore retirement income ranges different from the ranges displayed by interface 1090F in Fig. 13C. The system enables the individual to use the second tool 1018E to experiment with the different plans. If the user wants greater control over the user's situation, the user may opt for the second tool. Unlike the first tool 1018D which determines alternative plans for the user, the second tool 1018E lets the user manipulate and experiment with various factors to adjust the achievable retirement income ranges as described above. The user can see in the graph 1097 how the user's retirement income range can change based upon the user's asset mix and other variables.

The user can change the user's acceptable retirement income goal and desired retirement income goal by horizontally moving the vertical bars which will change these goals upward or downward, respectively. This second tool can also include an enhanced control panel for changing spouse or partner information as described above. It should be appreciated that the system could display the information provided by the second tool in a horizontal or other fashion. If the user selects a plan using the second tool 1018E, the system enables the user to save the adjusted variables. The system will then calculate and display preferably three plans for the user using the adjusted variables. As further illustrated in Fig. 13E, the system is also adapted to provide an income assessment graph via interface 1091 F.

Testing the Plan Referring now to Figs. 14A, 14B, 14C and 14D, after the user selects a plan, the system provides a series of interfaces, 1100A, 1100B, 1100C and 1100D which direct the users through a series of tests to see if the user is comfortable with the plan that the user selected. As in the other embodiment, this is the point at which short-term expected volatility, the daily, weekly or monthly ups and downs of the user's investment portfolio, comes into play. Although the system focuses first and foremost on the longer-term risk of not meeting the user goals, the user's tolerance for short- term risk and the user's ability to remain with the user's investment plan are important for the user to achieve the retirement income goals or range.

Investment Recommendations Referring now to Figs. 15A, 15B, 15C and 15D, the alternative embodiment of the present invention provides investment recommendations as the system provides investment recommendation interfaces 1110A, 1110B, 1110C and 1110D for the user to understand the investment recommendations provided by the system. The system preferably seeks to build portfolios where the stock portfolio recommended to the user is made up of the following: (a) U.S. stocks with a large-growth investment style; (b) U.S. stocks with a large-value investment style; (c) U.S. stocks with a small- cap-growth or mid-cap-growth investment style; (d) U.S. stocks with a small- cap-value or mid-cap-value investment style; and (e) international stocks, as discussed previously.

Action List Referring to Figs. 16A, 16B, 16C, 16D, 16E, 16F and 16G, in the alternative embodiment the system provides the user with interfaces 1120A, 1120C, 1120D and 1120E which provide steps, personal alerts and an action list of everything the user needs to do to implement the recommended retirement plan. The action list provide specific changes or actions the user must take to implement the plan including changes to the user's investment choices, savings rates and the like. The user can print the action list which is preferably designed to encourage immediate user response. The action list also preferably includes an explanation that will subsequently remind the user of the reasoning behind the user's decision.

Alternative Asset Mix Embodiment

Referring now to Figs. 17A, 17B, 17C, 17D and 17E, in a further alternative embodiment of the present invention, the system provides interfaces 1130A, 1130B and 1130D which provide recommended percentages of each asset class or the asset mix for the plan instead of giving specific investment recommendations. This alternative embodiment also provides an interface which enables a user to pick specific funds to meet the asset mix instead of recommending funds.

System Calculations The system makes a series of calculations to analyze the user's current situation, create plans for the user and to make specific recommendations to the user. It should be appreciated that the calculations, formulas, variables, constants and assumptions could vary depending on the system implementer's determinations of how the system should make such calculations and the important information.

Calculating Asset Class Forecasts The system implementer preferably provides asset class forecasts of the pre-expense expected returns, standard deviations, and correlations of the four asset classes (i.e., stocks, bonds, cash and company stock).

The system preferably uses a specific model for company stock designed to reflect the characteristics of the organization's stock. If this is not available, the system uses a generic model for company stock: RK = Rs + UK where RK = the return on company stock, Rs = the return on stocks, and UK = the idiosyncratic return on company stock. This is a market model in which the beta of company stock is one. It implies that the expected return on company stock is equal to the expected return on stocks. It also implies that: where PKA = correlation between returns on company stock and asset class A, σs = standard deviation of returns on stocks, σι< = standard deviation of company stock, and p_SA= correlation between returns on stocks and asset class A, then

Modeling the Retirement Savings Asset Pools The retirement savings are preferably held in multiple asset pools. Each asset pool has its own: initial value, cash flows, asset class expected returns after expenses and asset mix. The user specifies the initial value of each asset pool. Omitting a value is equivalent to setting it to zero. For pools in which the user lists specific funds and securities through a details dialog box, the initial value is the sum of the dollar amounts. If the user provides a positive value for company stock within his or her own 401 (k) account, the specified value is the initial value of the asset pool that represents the user's holdings of company stock within the user's 401 (k) account. The system subtracts this value from the current balance of the user's 401 (k) account to obtain the initial value of the asset pool that represents the rest of the user's 401 (k) account.

Cash flows for asset pools that relate to the primary 401 (k) of the user and the user's spouse or partner (if applicable) are derived from projected salaries, employee and employer contribution rates, and loans. The cash flows for all other pools are the constant annual amounts specified by the user. If the user indicates that the home will be sold before retirement, the expected net cash profit is added to the cash flows of the taxable accounts pools for the year indicated. If none of these pools have been set up, an asset pool is set up with the default asset mix, an initial value of zero, and all other cash flows set to zero. Cash flows are assumed to occur once a year on the last day of the year. The first set of cash flows occur one year from the present. If the analysis is being performed for the user alone, the last set of cash flows occurs at the end of his or her working life. The system assumes that it occurs on the date that the user reaches his or her retirement age. (The system assumes that all birthdays are on December 31.) If the analysis is being performed for a couple, the last set of cash flows occurs as soon as one person reaches retirement age. If one person is still working at this point, his or her income goes into the retirement model described below.

Calculating Asset Class Expected Returns The system calculates expected returns after expenses. For taxable accounts, the system treats taxes as an additional expense. The system calculates expected return after expenses using the formula

= m* - - τ¹ where m* = the vector of asset class expected returns before expenses, f = the vector of asset class fund expenses for pool i, τ' = the vector of asset class tax expenses for pool i, and m' = the vector of asset class expected returns for pool i after all expenses

For tax-deferred pools, τ' =0. For taxable pools, the system implementer provides the values of τ^l

The asset class fund expenses depend on which funds are used to implement each asset class. If the user does not fill in the details dialog box, the generic fund expenses must be provided by the system implementer. If the details dialog box is filled in, the fund expenses are derived from the asset mixes and fund expenses of the funds. The system defines: v' = vector of initial values of investments funds that make up pool i

V_j = initial investment in fund j in pool i (an element of v') Vj(0) = initial value of pool i = sum of the elements of v' X¹ = matrix of asset mixes of funds that make up pool i, one column for each account, one row for each asset class

X' ^Aj = allocation to asset class A of fund j in pool i (an element of Xi)

F¹ A, - fraction the allocation to asset class A that is due to fund j in pool i (only defined for asset classes that are represented in pool i)

The system uses the formula:

If asset class A is not represented in pool i, _A is set equal to the generic fund expense provided by the system implementer. If asset class A is represented in pool i,

where C_j = fund expense of fund j in pool i f = fund expense of asset class A in pool i (an element of f)

Asset Mixes The system implementer provides a list of asset mixes to see which mixes, if any, achieve the two retirement income goals. For the purpose of this analysis, these asset mixes are treated as if they are implemented with generic asset class funds. The asset mixes are preferably divided into groups that represent broad levels of short-term risk. The asset mixes for the pools other than the one that represents the users 401 (k) account remain fixed throughout the analysis. For some of the asset pools, the user has the option of filling in the details dialog box. If the user does not fill in the details dialog box for one of these pools, a default asset mix provided by the system implementer is used and treated as if is implemented with generic asset class funds. If the user fills in a details dialog box, the asset mix of the pool is derived from the asset mixes of the funds. For asset pools that represent the user's company stock, the asset mix is 100% Company Stock.

Calculating 401 (k) Contributions and Loans Both the user and the spouse or the partner (if applicable) can have a 401 (k) with employee contributions, employer matches, and loans. The user's employer contributions can either be part of the main asset pool which represents the main part of the user's 401 (k) account or a separate asset pool representing the user's company stock holdings within their 401 (k) account, depending on how the user specifies that employer matches are handled. The employee's contribution is: S_e(t) = min(sY(t),S_max(t)) where s = contribution rate

Sm_ax(t) = maximum annual employee contribution in year t

Y(t) = projected income in year t

The system implementer provides values for S_max(t) based on the system's implementer's forecast of future legal limits on 401 (k) contributions. The system defines:

Ym_ax(t) = maximum income qualifying for employer match in year t

The system implementer provides values for Ym_ax(t) based on the system implementer's forecasts of future legal limits on qualifying incomes for employer matches in 401 (k) plans.

The employer's contribution is 100ωι percent of the first 100κι percent, then 100ω₂ percent of the next 100κ₂, and then 100ω₃ percent of the next 100κ₃. However, the highest level of income that the employer can apply the match to is Y_maχ(t). Furthermore, the employer's matching stops when once the employee has contributed S_maχ(t). Also, in a matching program, the amount of the match cannot exceed what the employee has contributed. This results in the following formula for the employer's contribution:

K^* = ω, min (s, K, ) + ω₂ min (max (θ,s -K_j),κ₂) + ω₃ min (max (O^S -K^ -κ₂),κ₃) The system uses the following:

C-4oik(t) = the cash flow into the 401 (k) in question in year t

C₂(t) = the cash flow into the asset pool that represents the holding of company stock with the 401(k) plan in year t

In years in which there are no loans, for the user's 401 (k) when employer matches are not in company stock the system uses:

C₂(t)= 0 The first formula also applies also applies to the spouse's or partner's 401 (k) account, where the values of S_e(t) and S_m(t) are for the spouse or partner. If the user's employer makes matches in company stock:

c₂(t)= s_m(t)

Accounting for an Existing Loan

The system uses the following:

A = amount of payment in time 0 dollars π = inflation rate v = date loan is fully paid-off For an existing loan, the system assumes that contributions continue during the repayment period. The payments are level in nominal terms. However, the build-up formula requires real cash flows. Hence, A must be inflation adjusted.

Until the existing loan is paid off, for the user's 401 (k) when employer matches are not in company stock, the system uses:

C_401k (t) = S_e(t)+ S_m (t)+A(l -l- π)-^t ₃ 0 < t < v C₂(t) = 0 The first formula also applies also applies to the spouse's or partner's 401 (k) account if the spouse or partner has an existing loan, the values of S_e(t), S_m(t), A, and v being for the spouse or partner.

If the user's employer makes matches in company stock, the system uses:

C₄o_lk(t) = S_e(t)+ A(l + π)-^t, 0 < t < v c₂(t)= s_m(t)

Accounting for a Future Loan

The system uses the following: L = amount of loan y = nominal interest rate of loan s = date that loan is taken A = amount of payment in time s dollars v = date that loan is paid off The system assumes that the loan will be fully paid-off in v-s years or at retirement (v = retirement age), whichever comes first. The loan is paid off as a nominal annuity so that: yL

A = ι -(ι + y)-^(v-

There are no regular contributions when the loan is taken and during the repayment period. The payments are level in nominal terms. However, the build-up formula requires real cash flows. Hence, A must be inflation adjusted. The real cash flows of the 401 (k) pools over the period s to v are as follows:

C_401k (t) = A(l + π)-^(t-^s) ₃ s < t < v

If there is an asset pool that represents the holding of company stock within the 401 (k) plan, the cash flows to it are zero over the period s to v. Post-Tax Contributions or Thrift Plans

Some entities allow participants to contribute post-tax dollars to their

401 (k) accounts. Such contributions are not tax-deductible, but can be a convenient way to save for retirement without opening a separate account.

The only difference with ordinary ("pre-tax") 401 (k) plans is at the time of withdrawal, because only dividends, interest, and capital gains are taxed at the marginal tax rate, but the "principal" — that is, the initial contribution — is not. For simplicity, however, these contributions are treated as something added to the cash flow after checking for the S_max(t) contribution limit and as fully taxed (including the principal) at the time of withdrawal.

Therefore, any post-tax contribution is added to C_mk(ή after checking S_max(t) : oι_/fc (0 ⁼ _401& (t) + _401t (t) , where 4oι*( j_s the total contribution, including post-tax contributions, to the 401 (k) account in year t.

Target Company Stock If a user has a concentration in company stock that is above 10% of their total financial wealth, a notification or caution page is displayed to the user. The page provides appropriate educational content and asks the user for a target rate and for a divestiture rate as explained below. To determine this, the system lets 0 < # < 1 be the fraction of total financial wealth represented by company stock within the user's 401 (k) plan. If ^≥ °-¹⁰ (i.e., ten percent), then the caution page is displayed. For example, a user may have $1 million in his brokerage account and another $ 1 million in his 401 (k) account, of which (401 (k)) $100,000 in company stock. For this user = 100,000 /(1,000,000 + 1,000,000) = 0.05

The target rate & is the desired level of company stock as a fraction of total financial income. If ^«9 > ^«9 ₎ the user receives details on how much company stock to sell to gradually approach the desired share of company stock. The approach is gradual to avoid having the user take a large market risk and sell all of his or her company stock holdings at a single time. The field is pre-populated with a number provided by the plan sponsor (e.g., their maximum allowed divestiture rate).

In cases where the match is (fully or partially) in company stock, the amount of new company stock should be lower than the amount the user is going to divest. In any case, the non-company-stock part of the 401 (k) receives contributions and is likely to grow at a faster rate, while the company stock balance remains constant or grows at a slower pace because it receives little or no net contributions.

The dollar amount of divested company stock is: divested(t) = minjsr • F₃ (t), max{θ, (& - 3^* )- V₃ (t)}} where ^m is the chosen annual divestiture rate and V3(t) is the current balance of Pool #3.

For each of the periods, the divested(t) amount must be subtracted from that period's company stock balance (a negative contribution to Pool #3). It then is added (an extra contribution to Pool #1 , not subject to the Smax(t) limit) to the mutual funds balance of the 401 (k):

C_m" _k (0 = C_mk (0 + C l it) + divested(t) C₃ t) = φ - S_m (t) - divested (t)

where ^40!t '' is the total contribution, including after-tax contributions, and augmented by the money moved within the 401 (k) account from company stock (Pool #3) to funds (Pool #1).

A potential issue arises for the periods after the current one. The future balances in the accounts are not known. Thus, the calculation of & is not possible without further assumptions. Since only the cash flows (and not interest, dividends and capital gains) are known, the system can calculate only based on such cash flows. The system thus preferably considers assets at book value and disregard expectations about asset returns. This roughly approximates the assumption that the prices of the company stocks are going to increase at the same rate of the financial portfolio of the user. Let

Vi(t) = value of pool i at time t before the time t contribution is made Ci(t) = time t contribution

Thus, for any period t > ° , the system assumes that: V_λ(t) = V_λ(t-l) + C_m" _k(t-l) _

Moreover,

V (t) = V₃{t-ϊ) + C₃(t -l)

The last equation implies that no price change occurs because the system considers company stock at book value. The future balances of the other asset pools are calculated in the same way — only for calculating as follows:

The Lognormal Approximation of the Wealth Distribution

Percentiles of wealth are approximated using a lognormal distribution. The parameters of the distribution are calculated as follows. The system uses the following: T = the number years in the wealth accumulation phase. If the analysis is being performed on the user alone, T = retirement age - current age

If there is a spouse or partner,

T = min (user's retirement age - user's current age, spouse's or partner's retirement age - spouse's or partner's current age) The system uses the following: Rj(t) = 1 + year t total return on asset pool i

M,(t) = E[R,(t)] Q„(t) = E[R?(t)] Q_u(t) = E[R,(t)R_J(t)] M₁(t,v)= E[R_i(t,v)] Q_ii (t,v) = E[R₁ ²(t,v)] Q_β(t,v) = E[R₁(t,v)R_j(t,v)] The system uses: Q_ii(t) = M (t)+Var[R_i(t)]

Q_ij(t) = M_i(t)M_j(t)+ Cov[R_i(t),R_j(t)] where

Xi = the asset allocation of pool i that is in effect at the beginning of period t; and mi = the vector of asset class after-expense expected returns for pool i. The system uses the following:

Σ = the asset class variance covariance matrix Hence, E[R,(t)] = l + x;m₁

xiac,

By assuming that returns are serially independent, the system has:

^Q«(^t,v) = n s=t ^Q„(^s)

The system uses the following:

Vj(t) = value of pool i at time t before the time t contribution is made

Cι(0) = initial value of pool i = Vj(0)

Cj(t) = time t contribution Vj'(t) = value of pool i at time t after the time t contribution is made

Thus:

V₁ ^'(T) = V_I(T)+ C_I(T)

E[V_i(τ)] = ∑C₁(t>l,(t + l,T) t=o

E[v_i ²(τ)] = ∑C (t)Q_ii(t ₊ l,τ)₊ 2∑∑C_i(t₁)C_i(t₂)M_i(t₁ +l,t₂)Q_ii(t_{2 +}l,T) t=0 t₂=l t_!=0

E[V_{ (rty (T)] = C, (t)C _J (t)Q_y (t + 1, T) t=0

+ ∑∑ [CifcJC_jfej .fe +l,t₂)+C₁(t₂)C_j(t_I)M_J(t₁ +l.t₂)]Q_£j(t₂ t₂=l t,=0

Each pool has its own pattern of contributions and asset allocations.

The system uses the following: n = number of pools

V(t) = value of the entire portfolio at time t before the time t contribution is made V'(t) = value of the entire portfolio at time t after the time t contribution is made The system has:

v(τ)= ∑v,(τ) i=l v(τ)= v(τ)+c(τ) where

C(T) = ∑C_J(T) i=l

The first two raw moments of V(T) can be derived from the first two raw moments of the Vj(T)'s:

E[V(T)] = ∑E[V,(T)] i=l

E[V²(T)]= ∑E[V₁ ²(T)]+ 2∑∑E[V₁ (T)V_J(T)] i=l i=l j=l So far the system has made no assumptions about the underlying distribution of returns. The system approximates the distribution of V'(T) by assuming that V(T) is lognormally distributed with the following parameters:

μ_v = E[ln(v(T))] = ln(E[v(τ)J-ⁱσ²

The system uses the following: z_p = the z-score of the p^th percentile = Θ^"1(p) where Θ^"1(.) is the inverse of the cumulative density of the standard normal distribution. The approximation of the p^th percentile of V'(T) is:

V;(τ) = exp{μ_v +z_pσ_v}+C(τ)

The Retirement Model The system assumes that at retirement, the investor puts aside part of the portfolio to fund the estate and the rest is invested in a set of annuities that together with other income, provides a constant real level of income. The system defines the following:

VF = final value of financial assets V_E = value of portfolio put aside for estate at time of retirement

V_A = total value of annuities So that v_A =v_F -v_E

V_F is simply the value of all retirement assets at the time that the person retiring retires as calculated in the build-up phase described above. If the analysis is being done for a couple in which the two people will retire at different times, V_F includes all of retirement assets of both people at the time that the first person to retire retires. The system assumes that these assets are used to fund the annuities and the estate. All of the earnings of the person who is still working become part of retirement-period income. With the two-goal approach, V_F is preferably calculated at both the 50^th percentile and the 5^th percentile of the distribution of portfolio value at retirement. A value of W will be calculated from each of the two percentiles of VF. The real riskless discount rates that are needed to price the annuities are provided by the system implementer. In order to do discount math with uncertain life spans, the system needs probabilities of being alive and of dying for all retirement years. These probabilities can be readily calculated from published mortality rates. Mortality rates are expressed as number of deaths per 1 ,000 people in the age and gender group. The system uses the following: m,(t) = the mortality rate of people of age t with the same gender as person i q,(t|s) = the probability that person i is alive at age t, given that he or she is alive at age s Thus: q,(s | s) = l m,(s + l) q, (s + l s) = l - - ^, ' ' 1000

When there are two people, the system calculates the probability of at least one of them being alive at each future date. The system uses the following: d = age of person retiring - age of spouse or partner qι(t|s) = the probability that the retiring person is still alive at age t, given that they are alive at age s q₂(t-d|s-d) = the probability that the spouse or partner is still alive at when the retiring person would have reached age t, given that the retired person is alive at age s q(t|s) = the probability that at least one of the two people is still alive when the retiring person would have reached age t, given that they are both alive when the retiring person is age s Where: q(t | s) = q₁(t | s) + q₂(t-d | s -d)-q₁(t | s)q₂(t-d | s-d) For a single person, the system uses the following: T = age of death T is a random variable. The expected age of death of someone whose current age is s is

E[T | s] = s + ∑_qι(t | s) t=s For a couple, the system uses the following:

T = age that retiring person would be when the last person of the couple dies So that

115+d⁺

E[T | s] = s + ∑q(t | s) t=s where

Calculating How Much to Put Aside for the Estate The estate is paid at time E[T|s]. The system assumes that at retirement, the investor puts aside money for the estate. This money is invested in risky assets. The system assumes that the amount of money put aside is just what is needed for the money put aside to reach the desired estate value at E[T|s], if the assets attain their median rate of return. Hence, the system calculates how much to put aside for the estate by assuming that the estate money is invested into the asset mix that has the highest median return. The system uses the following: s = retirement age of retiring person FV_E = the desired estate value IΎIE = the expected return on the assets that are put aside for the estate SE = the standard deviation of the returns on the assets that are put aside r_E = the median rate of return on the assets

If 1 + asset returns are lognormaliy distributed, the system uses:

VE is given by:

V - ^FVE

(l + r_E )^E[T|sl-

Calculating The Total Value of the Annuities The system uses the following:

W = the constant real dollar amount of income that the person or couple will receive every year during retirement.

Ij(t) = the sum of all other payments received by person i in year tlj(t) is the sum of: Social Security payments, payments from defined benefit plans, if the person is retired but has a part-time job, income from the part- time job, and if the person has not retired, income from their job. If the person in question is the member of a couple who is still working after the wealth accumulation phase, the system uses:

I₁(t) = Y₁(t)+DB₁(t) where Yj(t) = income from the person's job in year t as calculated using the salary curve, until the person retires. DBj(t) = payments from defined benefit plans in year t. If the person in question is retired in year t, I_i(t) = J_i(t)+ DB_i(t)+ ma (SS_i(age_i(t))- θ(age_i(t))max(j_i(t)- J_ex(age_i(t)),θ),θ) where

Ji(t) = income from a part-time job in year t agβi(t) = person's age on December 31 of year t SSj(.) = person's Social Security benefit in year t if there are no withholdings

J_ex(.) = amount of income that is exempt from the Social Security withholdings θ(.) = fraction of income in excess of J_ex(.) withheld

Calculations Using Part-Time Jobs The user can specify a part-time job during retirement for each person. To specify a part-time job, the user provides: Jli = the income from person i's part-time job TJj = the number of years that person I will hold his or her part-time job The system uses:

t ^t>^≤T^TJ^J _j ^<

Calculating the Defined Benefit Plans The user can specify up to two defined benefit plans for each person including a pension from the current employer, and other pension plans. For each defined benefit plan, the user provides an annual amount and a starting date. The system uses the following:

DBA1j = the annual amount from person i's employer-provider defined plan t1j = the starting year for person i's employer-provider defined plan DBA2i = the annual amount from person i's other defined plan t2j = the starting year for person i's other defined plan

The system defines: DB tU⁰' ^{t < ti}'

^, |DBA1,, t ≥ tl_j

so that

DB₁ (t) = DBl_i(t)+ DB2_l(t)

Calculating Social Security Payments In one embodiment of the system, the system estimates a person's Social Security benefit using the algorithm embodied in program code that Social Security Administration posts on its website with some simplifications and assumptions. The inputs to this algorithm are the retirement age of the person in question and the projected salary history from the salary curve and part-time job parameters. The output of the algorithm is a single number that represents the full Social Security benefit that the person will receive in years in which they are entitled to it. The user has the option of overriding the system's estimates of Social Security benefits with his or her own. The system uses the following:

SSBj = the person's Social Security benefit when they are eligible agβssmin = The earliest age at which a person can receive Social Security benefits agessstarti = max(person's retirement age, age_Ssmin) So that

In one embodiment of the system, the system assumes that the person's birthday is December 31 so that benefits start in the year after the person as reached the age of agessstarti-

If a person earns income while they are collecting Social Security, a fraction of earnings in excess of exempt income is withheld. The function θ(.) gives the fraction withheld and the function J_ex(.) gives the level of income that is exempt. These are both step functions of the person's age.

Under current law, the values change at two age break points. The system uses the following: agerspi = age break point

J_Θχi = exemption level between below age ageβpi θι = value of θ(.) when first degree of withholding is in effect

Under the assumption that the person's birthday is December 31 , the functions J_ex(.) and θ(.) are follows:

J exl > age < age_BPl

Jeλ^aS^Q) =

∞. age > age_Bn

θ 1. > age < age_BPl θ(age) =

0, age > age_Bn

Calculating the Payment from the Home Sold After Retirement If a home is sold after the date of retirement, the net cash profit from the sale needs to be considered. The system uses the following: t._H = the date that the home is sold IH = the net cash profit from the sale of the home

Calculating Retirement Income

Let

W = constant real dollar amount of income that a single person or couple will receive every year during retirement.

K = fraction of W that a surviving spouse will receive

The annuities fill in the gap between W or W and the sum of the li(t)'s each year (including IH in year tH). If the person is single, this is W- 11 (t). The value of the annuities is the present discounted value of these cash flows, each cash flow weighted by the probability that the cash flow it will occur. The system assumes that the sale of the home is only relevant if the person is alive at tH:

where

Given the value of the annuities, the system solves to W to obtain retirement income:

w = v_A +v_T1 +v '„HI

V $, 1

For a couple, in each period there are three scenarios in which there will be a cash flow from regular income:

Scenario Probability Cash Flow

Both people alive qιq₂ W-lrl₂

Person 1 alive, person 2 dead qι(1-q2) W-

Person 1 dead, person 2 alive (1-qι)q₂ W-l₂ where qi = qι(t[s) and q₂ = q₂(t-d|s-d).

The system also assumes that the sale of a home is only relevant if at least one person is alive at time ϊw so that

This results in the annuity value being V_A = W - V_$1 -V_π -V_I2 -V_H where Vn is as it defined above,

and

Given the value of the annuities, the system solves W to obtain retirement income:

V_Λ -t-V_τl + V_τ, + V, w = - I₂

V $, 1

All annuity calculations should be made using appropriate annuity mortality tables.

Calculating the Salary Curve In one embodiment of the system, the system uses a three-stage model of salary growth. In the first stage, a person's salary growth at a compound annual rate of Gi from age t₀ to age t|. In the second stage, salary grows at a compound annual rate of G₂ from age ti to age t₂. From age t₂ forward, salary grows at a constant rate of G₃. The system uses the following: g(t) = the continuous-time annual rate of salary growth at age t The system assumes that g(.) is linear in each stage:

where g₃ = ln(1+G₃), the continuous-time annual rate of salary growth in the third stage; a-t, a₂, bi, b₂ are parameters to be solved for There are four parameters to solve for and four constraints. The first constraint is that the compound annual growth rate between from age to to ti is Gι. The system uses the following: gι = ln(1+Gι) The constraint is that:

The first constraint is that the compound annual growth rate between from age ti to t₂ is G₂. The system uses the following: g₂ = ln(1+G₂) The second constraint is that:

The third constraint is that the first and second segment of g(.) meet at t=tι so that:

The fourth constraint is that the second and third segment of g(.) must meet so that: a₂ +b₂t₁ = g₃ The four constraints form four linear equations in four variables that can be solved as follows:

The system needs to calculate salary levels from the growth rates given by g(.). To do this, the system needs to calculate cumulative salary growth. The system uses the following:

The system uses the following: tc = current age t = number of years beyond current age

Y(t) = salary in year t The user provides the value of Y(0). The salary in any future year is given by: _{γ(t) =} exp(y(t ,t ))_γ(Q) e (t_cJ) The value of y(v) is given by:

Contribution Hiatus If the user decides to take some time off work (for example, to care for an elderly parent) the system will set the compensation points corresponding to the hiatus periods to zero. Since the 401 (k) contributions are percentages of compensation, they will be zero for the corresponding periods.

Social Security Benefit Calculation

In one embodiment of the system, the system estimates the Social

Security benefits based on program code that Social Security Administration posts on its website with some simplifications and assumptions. The simplifications are as follows. The system measures time in years rather than months. The system assumes that the person in question is born on the last day of their birth year. The person in question has income only as an employee, not as an employer. The system does not consider the possibility of disability or widowing benefits. The system does not consider military service, railroad earnings, or a pension from a job not subject to

Social Security withholding. The system assumes that: For years beyond which historical data are available, the cost of living grows at the system implementer's assumed inflation rate. For years beyond which historical data are available, real average income grows at an historical rate or at a rate provided by the system implementer. For years beyond which historical data are available, the ratio of nominal average income to real average income grows at the system's assumed inflation rate. The person's real salary for years prior to the current year followed the same salary curve that the system uses to project future 401 (k) contributions. The system simply evaluates the function Y(.) for years before the present. In years which historical data are available, the ratio of the person's nominal salary to his or her real salary is set to the historical Consumer Price Index (CPI), normalized so that the CPI of the current year equals one. The person's real salary for future years will follow the salary curve that the system uses to project future 401 (k) contributions, until retirement. If the person retires before becoming eligible for Social Security and the user has indicated that the person will have a part-time job in retirement, the income from the part-time job from the age of retirement until the age of eligibility will be credited towards Social Security benefits. The person began to work at least 35 years before they will begin to receive Social Security benefits. There are no years in which they did not or will not work from that year until they retire. The 35 years prior to when the person will begin to receive Social Security benefits are the 35 years of their highest wage income. In years beyond which historical data are available, the ratio of the person's nominal salary to his or her real salary grows at the system's assumed inflation rate. Current laws regarding Social Security benefits will change.

All calculations are done in nominal dollars using the above assumptions. The final benefit number is deflated back to current dollars using the system-assumed inflation rate.

Using the First Tool The first tool changes the variables selected by the user in search of asset mixes that meet both retirement goals. The algorithm is run for each of the three short-term risk groups defined by the system implementer. In one embodiment of the system, the algorithm is as follows:

If there is only one variable, it is changed by the amount that is normally applied to the smallest increment defined by the system implementer until either a solution is found or the limit on the variable is reached. If there are two or more variables, the system tests all variables to see if the limits defined by the system implementer have been reached. If the limits on all variables have been reached, the system stops looping. If the limit has been reached on only one variable, the system breaks out of this loop and proceeds using the same algorithm, or the single variable algorithm described above if there is only one variable left, treating the remaining variable as if it were the only variable. The system changes both variables by amounts defined by the system implementer. The system stops looping if this results in a solution. If not, the system repeats the process.

401 (k) Contributions Because of the limit on employee contributions to 401 (k) plans, it is possible that increasing the contribution rate can actually reduce the total of employee and employer contributions. Therefore, in seeking a solution that involves changing a 401 (k) contribution rate the system should only increase a 401 (k) contribution rate if doing so increases the value of both ends of the retirement income range for all asset mixes being considered. If not, the value should not be increased and the contribution rate should be treated as if it has hit its limit.

Second Tool Calculations The second tool allows the user to set the effect of changing variables has on the retirement income ranges of all asset mixes.

Calculating Outside Contributions

In one embodiment of the system, increases in outside contributions go into Taxable Accounts. If the user did not set up Taxable Accounts, an asset pool is set up with a default asset mix and a balance of zero. Increases in outside contributions go into taxable accounts. If the user did not set up taxable accounts, it is set up with the default asset mix and a balance of zero.

In one embodiment of the system, decreases in outside contributions are taken out of contributions in the various non-401 (k) accounts in the following order:

Taxable (brokerage) Company stock held outside 401 (k) Variable annuity Traditional IRA

Roth IRA Contributions are reduced one account at a time. When contributions for an account reach zero, the remaining reduction is applied to the next account on the above list.

Fund Selection

After the user has selected the asset mix for the primary 401 (k) plan, the system selects a set of mutual funds to implement the asset mix. The set of funds that the system can choose from depends on the implementation of the system. If the user is accessing the implementation of the system designed specifically for the user's employer-sponsored 401 (k) plan, the set of funds will be those that the plan sponsor has selected. If the user is accessing a generic implementation of the system, the user selects a set of funds from a larger set provided by the system implementer. Prior to the implementation of the system, the system implementer assigns a numerical score to each fund that the system can access. This score should reflect the system implementer's view of the quality of the fund.

The score of a portfolio of funds is simply the weighted-average of the scores of the funds that constitute the portfolio, the weights being the fund portfolio weights.

The system implementer must also define a set of fund characteristics that reflect the risks associated with a fund or fund portfolio. These characteristics should include expose to the primary asset classes (stocks, bonds, and cash). They can also include exposure to equity styles (large- cap growth, small-cap value, etc.), economic sectors (industrial, health, financial, etc.), and security characteristics such as bond duration and credit rating. Each characteristic of each fund must have a numerical value so that the characteristics of portfolios of funds can be calculated by taking weighted-averages across funds.

For each asset mix that the user might select, the system implementer must define a set of ideal or target risk characteristics. A fund portfolio's deviations of from these targets is summarized in a penalty as follows:

^M / \9

where

P = the value of the penalty M = the number of characteristics p_j = the weight in the penalty value that deviations from target value of characteristic j b J = the target value of characteristic j bj = the value of characteristic j for the portfolio

The system implementer selects the value of the p s. The system selects the fund portfolio by maximizing the following objective function:

Q = xq-P where

Q = the value of the objective fund τ = the tolerance for the penalty q = the fund quality score for the portfolio P = the value of the penalty for the portfolio The system implementer selects the value of τ.

When maximizing Q, the system constrains the fund weights as follows: the sum of the weights must equal 100%, each weight must fall within a range set by the system implementer, the number of funds used must fall within limits set by the system implementer. The system maximizes the value of Q, subject to these constraints, by using an algorithm specified by the system implementer. In the preferred embodiment of the system, the user can customize the fund selection process by setting the preferred number of funds to use. The user can further customize the fund selection process by specifying a preference for index funds, particular fund family, and custom list of funds. These preferences are implemented by increasing the fund quality score of the preferred funds during the fund selection process by an amount determined by the system implementer. While the present invention has been described in connection with what is presently considered to be the most practical and preferred embodiments, it is to be understood that the invention is not limited to the disclosed embodiments, but on the contrary is intended to cover various modifications and equivalent arrangements included within the spirit and scope of the claims. It is thus to be understood that modifications and variations in the present invention may be made without departing from the novel aspects of this invention as defined in the claims, and that this application is to be limited only by the scope of the claims. All patents cited herein are hereby incorporated by reference in their entirety and relied upon.

Claims

CLAIMSThe invention is hereby claimed as follows:

1. An electronic retirement planning system accessible to a user through a data network, said system comprising: means for obtaining a user's retirement income goals, means for obtaining financial and retirement information regarding the user; means for determining a plan for the user to follow to reach the user's retirement income goals based on the financial and retirement information obtained regarding the user; and means for providing the plan to the user.

2. The retirement planning system of Claim 1 , wherein the means for obtaining the user's retirement income goals includes means for obtaining a user's retirement income range.

3. The retirement planning system of Claim 2, wherein the user's retirement income range includes at least a first retirement income goal and a second retirement income goal.

4. The retirement planning system of Claim 3, wherein the first retirement income goal and the second retirement income goal are on an annual basis.

5. The retirement planning system of Claim 4, wherein the first retirement income goal is a median annual retirement income goal and the second retirement income goal is a downside annual retirement income goal.

6. The retirement planning system of Claim 5, wherein the first retirement income goal is an annual retirement income goal desired by the user and the second retirement income goal is an annual retirement income goal acceptable to the user.

7. The retirement planning system of Claim 1, wherein the financial and retirement information obtaining means includes means for obtaining an estate goal of the user.

8. The retirement planning system of Claim 7, wherein the financial and retirement information obtaining means includes means for obtaining financial information regarding the user's spouse or partner.

9. The retirement planning system of Claim 2, wherein the plan determining means includes means for calculating whether the user will be able to achieve an actual retirement income within the user's retirement income range based on the user's financial and retirement information.

10. The retirement planning system of Claim 9, wherein the calculating means includes means to determine a range of actual retirement incomes achievable by the user based on the user's financial and retirement information and at least one plan asset mix.

11. The retirement planning system of Claim 10, wherein the plan determining means includes means for displaying said range of actual retirement incomes.

12. The retirement planning system of Claim 10, wherein the plan asset mix includes a combination of stocks, bonds and cash.

13. The retirement planning system of Claim 12, wherein the calculating means determines a plurality of ranges of actual retirement incomes achievable by the user based on the user's financial and retirement information and a plurality of plan asset mixes.

14. The retirement planning system of Claim 13, wherein the plan determining means includes means for displaying said plurality of ranges of actual retirement incomes.

15. The retirement planning system of Claim 14, wherein the plan determining means includes means for enabling the user to select a plan.

16. The retirement planning system of Claim 15, wherein the plan determining means includes means for adjusting the user's retirement income range and for adjusting the user's financial and retirement information.

17. The retirement planning system of Claim 16, wherein the adjusting means includes means to enable the user to input the user's flexibility regarding adjustment of the user's retirement income range and financial and retirement information.

18. The retirement planning system of Claim 17, wherein the adjusting means includes means for adjusting the user's retirement income range and financial and retirement information based on the user's flexibility and for determining at least one plan that will achieve the user's adjusted retirement income range.

19. The retirement planning system of Claim 9, wherein the plan determining means includes means for displaying the plan which achieves the user's retirement income range.

20. The retirement planning system of Claim 15, wherein the adjusting means includes means for displaying achievable ranges of retirement incomes based on the user's financial and retirement information and for enabling the user to adjust the user's retirement income range and the user's financial and retirement information.

21. The retirement planning system of Claim 20, wherein the display means includes means to display plans having different plan asset mixes.

22. The retirement planning system of Claim 20, wherein the adjusting means includes interface means for enabling the user to adjust the users certain financial and retirement information of the user, to adjust the retirement income range and to graphically illustrate how said adjustments effect the actual retirement income.

23. The retirement planning system of Claim 1 , which further includes means for testing the user's comfort level with the plan.

24. The retirement planning system of Claim 23, which further includes means for providing the user with a detailed action list for implementing the plan.

25. The retirement planning system of Claim 23, wherein the testing means includes means for displaying at least one loss scenario that illustrates a loss of assets over time.

26. The retirement planning system of Claim 25, wherein the testing means includes means to enable the user to request a different plan based on a different plan asset mix.

27. The retirement planning system of Claim 1, wherein the plan determining means includes means to select an investment option from a defined contribution plan accessible to the user.

28. In a financial analysis system, a retirement planning method for providing a plan to a user for achieving the user's retirement income goals, said retirement planning method comprising the steps of: (a) obtaining the user's retirement income goals;

(b) obtaining the user's financial and retirement information;

(c) determining a retirement plan for the user based on the user's retirement income goals and the user's financial and retirement information;

(d) providing the retirement plan to the user;

(e) testing the retirement plan to determine if the user is comfortable with the retirement plan; and

(f) repeating steps (c) and (e) until the user is comfortable with the retirement plan.

29. The retirement planning method of Claim 27, wherein obtaining the user's retirement income goals includes obtaining a retirement income range for the user.

30. The retirement planning method of Claim 28, obtaining the user's retirement income range includes obtaining a first retirement income goal and a second retirement income goal.

31. The retirement planning method of Claim 29, wherein obtaining the first and second retirement income goals includes obtaining a median retirement income goal and a downside retirement income goal.

32. The retirement planning method of Claim 29, wherein obtaining the first and second retirement income goals includes obtaining a desired annual retirement income goal and an acceptable annual retirement income goal.

33. The retirement planning method of Claim 29, wherein obtaining the user's financial and retirement information includes obtaining an estate goal that the user desires to leave to designated beneficiaries.

34. The retirement planning method of Claim 29, wherein determining a retirement plan includes determining a range of lump-sum values based on the financial and retirement information and a forecast of return based on major asset classes selected from the group consisting of stocks, bonds and cash.

35. The retirement method of Claim 33, which includes making a calculation to translate the expected lump sum values into a range of projected retirement incomes.

36. The retirement planning method of 28, which includes displaying at least one retirement plan with an asset mix of stocks, bonds and cash and a range of projected retirement income if such projected range equals or exceeds the user's retirement income range.

37. The retirement planning method of 35, which includes displaying a plurality of retirement plans that have projected retirement income ranges lower than the user's retirement income ranges if the range of projected retirement incomes do not exceed the user's retirement income range.

38. The retirement planning method of Claim 36, which includes changing the user's retirement income range if the user is unwilling to accept the range projected retirement incomes provided by any of the plurality of retirement plans.

39. The retirement planning method of Claim 37, which includes changing the user's financial and retirement information if the user is unwilling to accept the range of projected retirement incomes provided by any of the plurality of retirement plans.

40. The retirement planning method of Claim 37, which includes adjusting the projected retirement income range by changing the financial and retirement information.

41. The retirement planning method of Claim 28, wherein testing the retirement plan includes demonstrating to the user multiple real-world loss scenarios for the retirement plan over pre-determined periods of time.

42. The retirement planning method of Claim 28, which further includes providing an action list for implementing the retirement plan to the user which includes a percent allocation of money that currently exists in the user's defined retirement plan by fund, a percent allocation of money invested after implementing the retirement plan in the user's defined retirement plan by fund, a reminder for the user to visit the user's defined retirement plan to make recommended changes, and a reminder for the user to return to the system in a given period of time.

43. In a financial analysis system, a retirement planning method for providing a retirement plan to a user, comprising the steps of: (a) obtaining the user's annual retirement income range including a first annual retirement income goal and a second annual retirement income goal'

(b) obtaining the user's financial and retirement information;

(c) determining a retirement plan for the user based on the first annual retirement income goal, the second annual retirement income goal and the user's financial and retirement information;

(d) testing the retirement plan to determine if the user is comfortable with the retirement plan; (e) repeating steps (c) and (d) if the user is not comfortable with the retirement plan; (f) adopting the retirement plan; and (g) providing a detailed action list to the user to implement the retirement plan.

44. The retirement planning method of Claim 42, wherein determining the retirement plan includes calculating an annual retirement income range based on the user's financial and retirement information and based on at least one retirement plan asset mix, and displaying the annual retirement income range to the user.

45. The retirement planning method of Claim 43, wherein determining the retirement plan includes enabling the user to select a retirement plan if the annual retirement income range is acceptable to the user.

46. The retirement planning method of Claim 44, wherein determining the retirement plan includes providing at least one tool to the user for adjusting at least one of the first retirement income goal, second retirement income goal, and the financial and retirement information.

47. The retirement planning method of Claim 44, wherein determining the retirement plan includes providing a tool which enables the user to input the user's flexibility on changing at least one of the first retirement income goal, the second retirement income goal and the financial and retirement information, and determining the retirement plan based on the user's flexibility.

48. The retirement planning method of Claim 44, wherein determining the retirement plan includes providing a tool which enables the user to interactively change the first retirement income goal, second retirement income goal and the user's financial and retirement information and which displays the range of achievable retirement income based on the user's changes.

49. A method for adopting an investment plan comprising the steps of:

(a) displaying differing investment plans that will each eventually yield retirement income for a user which is within the user's annual retirement income range;

(b) enabling the user to select an investment plan;

(c) testing the user's comfort level with the selected investment plan;

(d) returning to step (b) if the user is not comfortable with the selected plan; and

(e) enabling the user to adopt the investment plan if the user is comfortable with the selected investment plan.

50. An electronic retirement planning system accessible to a user through a data network, said system comprising: means for obtaining financial and retirement information regarding the user; means for determining at least one plan for reaching a retirement income range based on the financial and retirement information obtained regarding the user; means for enabling the user to accept said plan to reach said retirement income range; means for enabling the user to specify an alternative retirement income range for determining an alternative plan based on said alternative retirement income range; and means for providing the alternative plan to the user.

51. The retirement planning system of Claim 50, wherein each retirement income range includes at least a first retirement income goal and a second retirement income goal.

52. The retirement planning system of Claim 51 , wherein the first retirement income goal and the second retirement income goal are on an annual basis.

53. The retirement planning system of Claim 52, wherein the first retirement income goal is a median annual retirement income goal and the second retirement income goal is a downside annual retirement income goal.

54. The retirement planning system of Claim 53, wherein the first retirement income goal is an annual retirement income goal desired by the user and the second retirement income goal is an annual retirement income goal acceptable to the user.

55. The retirement planning system of Claim 50, wherein each retirement income range includes at least a first lump sum value and a second lump sum value.

56. The retirement planning system of Claim 50, wherein the financial and retirement information obtaining means includes means for obtaining an estate goal of the user.

57. The retirement planning system of Claim 50, wherein the financial and retirement information obtaining means includes means for obtaining financial information regarding the user's spouse or partner.

58. The retirement planning system of Claim 50, wherein the determining means includes means for calculating a plurality of retirement income ranges achievable by the user based on the user's financial and retirement information and at least one plan asset mix.

59. The retirement planning system of Claim 50, which includes means for displaying the reachable retirement income ranges.

60. The retirement planning system of Claim 59, which includes means for displaying the alternative retirement income ranges.

61. The retirement planning system of Claim 60, which includes means for displaying the alternative plan.

62. The retirement planning system of Claim 50, which includes means for adjusting the reachable retirement income range and the user's financial and retirement information.

63. The retirement planning system of Claim 62, wherein the adjusting means includes means for enabling the user to input the user's flexibility regarding adjustment of the reachable retirement income range and financial and retirement information.

64. The retirement planning system of Claim 50, which includes means for enabling the user to adjust certain financial and retirement information, to adjust the reachable retirement income range and to graphically illustrate how the adjustments effect the alternative retirement income range.

65. The retirement planning system of Claim 50, which includes means for testing the user's comfort level with a volatility of the plan or the alternative plan.

66. The retirement planning system of Claim 65, wherein the testing means includes means for displaying at least one loss scenario that illustrates a possible loss of assets over time, based on the asset mix of the plan.

67. The retirement planning system of Claim 50, which includes means for providing the user with a detailed action list for implementing the plan or alternative plan.

68. In a financial analysis system, a retirement planning method for providing a plan to a user for achieving retirement income goals, the retirement planning method comprising the steps of: (a) obtaining the user's financial and retirement information;

(b) determining at least one initial retirement plan for the user based on the user's financial and retirement information, each said retirement plan including retirement income goals;

(c) displaying said retirement income goals to said user; (d) enabling the user to input the user's retirement income goals and determining at least one alternative retirement plan based on the inputted retirement income goals; (e) enabling the user to select an initial retirement plan or an alternative retirement; (f) testing the selected retirement plan to determine if the user is comfortable with the selected retirement plan; and (g) repeating steps (d) to (f) until the user is comfortable with the selected retirement plan.

69. The retirement planning method of Claim 68, which includes enabling the user to use at least one tool to determine alternative retirement plans.

70. In a financial analysis system, a retirement planning method for providing a retirement plan to a user, the retirement planning method comprising the steps of:

(a) obtaining the user's financial and retirement information;

(b) providing to the user at least one achievable retirement income range for the user based on the user's financial and retirement information;

(c) obtaining the user's annual retirement income range including a first annual retirement income goal and a second annual retirement income goal; (d) determining a retirement plan for the user based on the user's annual retirement income range;

(e) testing the retirement plan to determine if the user is comfortable with the retirement plan; (f) repeating steps (d) and (e) if the user is not comfortable with the retirement plan; (g) adopting the retirement plan; and

(h) providing a detailed action list to the user to implement the retirement plan.

71. The retirement planning method of Claim 70, wherein obtaining the user's annual retirement income range includes enabling the user to adjust at least one of the first retirement income goal and second retirement income goal of the achievable retirement income range.