What is Manifest's consolidation growth methodology?

Manifest calculates the estimated additional retirement savings growth for users who choose to consolidate their retirement savings into an active current retirement account. We do this based on your specific situation, our research, industry-standard data, and sound assumptions described below.
Consolidating retirements accounts helps grow your balance. The reasons driving this are:
1
Reduced cash out risks
Old accounts are frequently orphaned or cashed out by old employers.
2
Lower fees on active accounts
60-days after you leave a job, your fees can quadruple.
3
Better investment management
It's easier to manage one account well versus many old accounts.
4
Greater propensity to contribute
Consolidation into one active account encourages greater contributions.

Our Methodology:

Value of consolidating is calculated as the difference between your Balance with consolidation and Balance without consolidation. The rate of return of your savings is calculated based on your consolidation preference.

Starting Balance: This number is comprised of the balance of all your old retirement accounts. When available from your retirement provider, we directly use your current account balance. When the current balance is not available to us, we estimate the balance based on the salary range and number of years of employment you shared with Manifest. We use an industry-standard average contribution rate and market return to arrive at your current balance.

Rate of Return: 

Baseline growth without consolidation: 3.17%. 

If an investor invested a fixed amount in equity funds every year, the investor return would have been 3.17% a year for 20 years as calculated by DALBAR.

Consolidated growth in Employer-Sponsored Account: +2.08%  

    Reduced Cash Out Risks (0.25%) - Estimate based on EBRI cashout leakages. 

    Better Investment Management (0.50%) - Portfolio allocations drift as prices move, and so do risk metrics as a participant approaches retirement. Estimate based on Unconventional Success by David Svensen.

    Lower Fees on Inactive Accounts (0.33%) - The average 401(k) fee is 0.98% vs 0.25% for a low fee IRA (A Look At 401(k) Fees - DoL)
    Greater Propensity to Contribute (1.00%) - An estimate based on higher contribution limits, easier payroll deductions, and the concentration of managing one account.

Consolidated growth in Robo managed IRA: +1.79%

    Reduced Cash Out Risks (0.25%) - Estimate based on EBRI cashout leakages. 

    Better Investment Management (0.56%) - Portfolio allocations drift as prices move, and so do risk metrics as a participant approaches retirement. Estimate based on Unconventional Success by David Svensen.

    Lower Fees on Inactive Accounts (0.73%) - The average 401(k) fee is 0.98% vs 0.25% for a low fee IRA (A Look At 401(k) Fees - DoL)
    Greater Propensity to Contribute (0.25%) - An estimate based on higher contribution limits, easier payroll deductions, and the concentration of managing one account.

Consolidated growth in self-managed IRA: +1.73%

    Reduced Cash Out Risks (0.25%) - Estimate based on EBRI cashout leakages. 

    Better Investment Management (0.40%) - Portfolio allocations drift as prices move, and so do risk metrics as a participant approaches retirement. Estimate based on Unconventional Success by David Svensen.

    Lower Fees on Inactive Accounts (0.83%) - The average 401(k) fee is 0.98% vs 0.25% for a low fee IRA (A Look At 401(k) Fees - DoL)

    Greater Propensity to Contribute (0.25%) - An estimate based on higher contribution limits, easier payroll deductions, and the concentration of managing one account.

Assumptions Used:

1. Average contribution rate of 10% https://institutional.vanguard.com/ngiam/assets/pdf/has/how-america-saves-report-2020.pdf

2. Average Salary is calculated from the salary range selected by the user. We assume that users always provide the latest salary, so we deduct the average by 5% every year.

3. We compound interest annually in all our calculations.

4. Baseline growth rate is from DALBAR research data: Quantitative Analysis of Investor Behavior, Advisor "Free Look" Edition, 2012

The balance growth calculator is for illustrative purposes only. This is not a prediction or guarantee of future performance.