K⁴ Plan Goals -- A Solver, Not a Calculator

Although most employees realize the benefits of participating in their employer's 401(k), many fail to act because they simply don't know what to do. They want a clear retirement strategy they can easily implement; one that has a realistic chance of achieving their personal retirement goals. K⁴ Plan Goals uses a different approach to address the retirement savings problem. Rather than calculating the results of the participant’s trial strategies, K⁴ Plan Goals actually solves for the complete, optimal retirement strategy for each participant, eliminating frustrating iteration and time-consuming inputs.

THE RETIREMENT STRATEGY EFFICIENT FRONTIER

The blue diamonds represent combinations of savings rate, expected retirement age, expected income replacement, and investment risk as weighted by one particular participant. K4 Plan Goals solves for the strategy with the highest level of satisfaction and at least a 75 percent probability of success (the yellow diamond).

There are thousands of combinations of savings rates, retirement age, retirement income, and investment risk. When weighted by importance, each combination has a probability of successfully achieving all goals. If you could plot all the possible combinations based on probability of success and the participant's satisfaction, you would have a series of points as illustrated by the chart. Each one of the blue diamonds represents one complete strategy for retirement age, income, savings rate and investment portfolio. Those nearest the red line are the ones with greatest satisfaction at the various levels of probability, forming an "efficient frontier" of retirement plan strategies. The combination that comes the closest to meeting all of the participant's weighted objectives -- particularly those with the highest priorities -- is the one that will provide the happiest retirement. In this case, the one represented by the yellow diamond is this participant’s optimal strategy.

TRADITIONAL RETIREMENT CALCULATORS FALL SHORT

Participants are often given calculators to help with their retirement strategy. They input their current savings rate, investments, and goals and the calculator returns a probability of success. Others assume a particular probability and return how much needs to be saved or how it should be invested. However the results are expressed, it is up to participants to come up with trial solutions, run the numbers, and then estimate their satisfaction with the results. If not pleased, they can test other combinations until they find one they can live with. Given enough time and patience, they may find an efficient strategy, but even if they do, they still won’t know it. In many cases, frustrated participants either abandon the process or lack enough confidence in the results to take action. Frustration with this process is not surprising, but it can be eliminated with K⁴ Plan Goals.

K⁴ PLAN GOALS SOLVES FOR THE EFFICIENT STRATEGY

K⁴ Plan Goals starts with the same participant inputs, weights them by the participant's priorities, and couples them with the available investment options to run hundreds of Monte Carlo simulations. With K⁴ Plan Goals, each strategy combination is analyzed for both satisfaction and success based on the participant’s objectives and priorities. The result is the participant’s optimal solution -- the one complete strategy with greatest satisfaction and acceptable probability of success (i.e. the yellow diamond on the chart). No additional trial and error is needed because this is the best, complete strategy for the participant.

PARTICIPANTS TAKE ACTION

Unlike traditional calculators that produce hundreds of options and little additional guidance, K⁴ Plan Goals solves for the participant's optimal strategy and shows the precise actions needed to make it happen. It eliminates the need for iteration and guesswork because only K⁴ Plan Goals evaluates all available strategies based on both satisfaction and chance of success. K⁴ Plan Goals reduces participant abandonment rates and effectively removes the barrier to action. More participants are willing to act because they have a clear action plan leading to outcomes that meet their personal goals and priorities.