Income and Savings Rate


The Income and Savings Rate dimension estimates excess income and ability to add to savings. A high score indicates that a large percentage of income is discretionary and is available for investing. A low score indicates that all or almost all income is being used for ordinary expenses and not being added to annual investments. A higher income also bolsters the ability to respond to emergencies without cashing out portfolio funds. Having to take money out of your portfolio after it has declined creates irreparable harm to your long-term returns. Having a solid income will minimize the chance you will need to dip into your retirement account. That is why this dimension is an important consideration when assessing risk capacity.

Sample Risk Capacity Survey Question:

What is your total annual income?

  1. Less than $50,000
  2. $50,000 to $100,000
  3. $100,000 to $150,000
  4. $150,000 to $250,000
  5. $250,000 or more
Step 10IncomeSavings RateSavingsRisk Capacity