About the Pudding Index™
We are all on the road to retirement. In today’s world, each of us must take the lead to save for retirement and manage our accounts along the way.
How are you doing? Well, the proof is in…the Pudding Index™.
Using just four items of information, we compute a single score that gauges progress on your journey to retirement. The basis for the score is an index account we created: The Benchmark Account.
The Benchmark Account
- Would produce retirement income of about 60% of final pay for men (55% for women*) upon retirement at age 65;
- Grows each year on a consistent basis because it is not subject to the factors you confront in your account (unsteady investment returns, etc.);
- Can be used as a measuring stick by anyone, which gives everyone a way to compare their progress using a common language;
- Answers the “How am I doing?” question for today and at age 65**.
The Benchmark Account can accompany you on your trip to retirement, allowing you to track your scores from year to year.
*Women generally live longer than men. So, from the same amount of age 65 retirement assets, men can take a higher annual payout than women can.
**The Pudding Index™ is intended for people at or under age 65.
How is the Benchmark determined?
The Benchmark Account grows each year based on contributions equal to 9% of pay, investment returns of 7% and a factor for annual pay inflation.
With these growth factors and a fixed basis for shifting account balances into a lifetime income, the Benchmark Account targets to produce an income upon retirement at age 65 equal to 60% of your pay just before you retire (55% for women). Combined with Social Security, the Benchmark Account would produce a retirement income many people believe to be a good level.
But’s that’s a judgement call. You need to decide the level of income that is right for you. The Pudding Index™ gives everyone a common reference — the Benchmark Account — but does not claim to know the income level that is enough for you.
What does my Pudding Score™ mean?
Your Pudding Score™ is a measure of how your current amount of retirement fund assets compares to the amount the Benchmark Account says someone your age and pay should have accumulated by now. Scores of 100 or more say you are ahead of the index at this point in time and scores below 100 say you lag behind the index’s pace.
How does my Pudding Score™ change?
Your Pudding Score™ compares your asset build up against a moving target—the Benchmark Account. Your Score will change in the future as your assets grow by more or less than is expected by the Benchmark Account. For example, the index account assumes investment returns of 7% each and every year. Should all your other growth factors match up with the index exactly, your Pudding Score™ will increase if your accounts earn more than 7% and will go down if your investment returns are less.