Personal Finance

Want to know how prepared you are for retirement? There's a score for that

Key Points
  • You know you need to put money away for retirement, but do you know how long your savings will last?
  • A new score aims to measure just how well you can live in your later years based on how much you have now.
  • Knowing how you fare can help you decide whether to boost your savings or diversify your income streams.

You know you need to put money away for retirement. But how much do you really need to save?

It's a question that confounds many individuals. And not knowing can contribute to one big fear: that they will run out of money in their later years.

ATABOY | Getty Images

A new tool aims to help you understand just how close you are to meeting your goals.

A score called RISE — Retirement Income Security Evaluation — evaluates just where you fall in terms of having steady income in retirement, much like a credit score, on a zero to 850 scale.

The tool is provided by the Alliance for Lifetime Income, a nonprofit backed by the financial services industry. It was developed by Milliman, a provider of actuarial products and services.

Consumers can access the tool online. After inputting factors such as the Social Security income you expect, any pension income you may have, how much you have saved and your monthly living and medical expenses, you can see how well you will fare financially in retirement.

VIDEO2:3002:30
Here's how much money you should have saved

More from Personal Finance:
Here's how long it takes to improve your credit score
The big question to answer after you decide to retire
Head to these retirement destinations for the best weather

"Based on what you put in, this is your score and means you're going to run out of money if you live past a certain age," said Jean Statler, executive director at the Alliance for Lifetime Income.

The information you input in is anonymous, meaning it will not be shared with other parties. The tool is also intended to be flexible, so you can adjust certain data to see how that affects your score.

The alliance advocates that consumers consider annuities to generate guaranteed income. However, the tool itself does not steer consumers to specific investment products.

"Sometimes the answer is not an annuity," Statler said. That goes particularly for individuals who already have a high RISE score through other income sources.

VIDEO2:0302:03
Americans think they're prepared for retirement, but are they right?

Instead, the organization hopes that consumers will take away one key message: "Go talk to your financial advisor," according to Statler.

The tool is aimed at individuals ages 45 and up with investable assets of $75,000 to $2 million.

There are both consumer-facing and advisor-facing versions of the tool. The professional version takes more details of an individual's financial picture into account, such as portfolio allocations and different kinds of annuities.

Both versions are free.