Schwab Intelligent Portfolios | April 20, 2022

Exploring Goal Tracker for Schwab Intelligent Portfolios

Planning and goal setting play a critical role in helping people achieve financial success. For Schwab Intelligent Portfolios® clients, Goal Tracker is a tool that allows them to quickly and easily set and monitor how they're progressing towards a savings or income goal.

We're not alone in embracing the importance of planning—there's plenty of research out there that tells us the same thing. The facts are pretty stark: Seventeen percent of non-planners do not feel "very confident" they will reach their financial goals compared to 56% of those with a plan.1 Whether or not you work with a professional to establish and monitor your goals, you should be able to easily review your progress. Sometimes a small increase in your savings rate might be all that's needed to put you back on track toward achieving your goal. That's because your savings compound over time, and for a long-time horizon, those small increases in savings can have a big effect on your projected ending balance.

What is Goal Tracker?

Goal Tracker is a tab in the Schwab Intelligent Portfolios dashboard that helps you set up and track an investment goal for an account. For example, let's say you're saving for retirement or college, or maybe you're focused on a shorter-term goal. Goal Tracker projects how a portfolio might perform using a range of possible outcomes, and will show you how close you are to reaching your goal. If your goal is to generate retirement income, you can use Goal Tracker to set up a monthly withdrawal target and project how long your income stream will last.

Schwab Intelligent Portfolios Goal Tracker

Screenshot of Goal Tracker, a dynamic chart that tracks your progress toward your retirement goal and shows you how adjusting variables in your plan will impact your progress.
Goal Tracker provides daily monitoring of whether your goal is "on target," "off target," or "at risk" by projecting hypothetical portfolio performance so that you can track your progress over time and make any necessary adjustments. The tool uses dynamic graphics to show progress against a goal and enables you to make adjustments to variables such as your contributions, so you can see the impact of those changes on your goal. For more information about our Goal Tracker tool, check out this short video.

Goal Tracker methodology

If you're interested in getting more technical, you can find details on our Goal Tracker's methodology in this whitepaper, but here's a summary of how the projections work.

Goal Tracker uses long-term expected return estimates and simulations to show a better, average, or worse outcome to help monitor progress toward a goal. To do this, it uses Monte Carlo simulation to provide probability analysis on the likelihood that an investor's assets will reach his or her savings goal or that portfolio income will last until a selected end date. A Monte Carlo simulation is a statistical simulation technique, used widely in finance, engineering and other fields, to simulate a range of paths for portfolio performance, based on long-term return estimates and annual volatility around those estimates.

As part of estimating potential returns and monitoring progress toward your goal, the long-term return estimates of each asset class included in the portfolio need to be updated periodically based on inflation, interest rates, earnings projections, and other factors. These Capital Markets Expectations (CMEs) are not short-term tactical market calls, but rather long-term estimates over a 10-year horizon that are necessary inputs into the Monte Carlo analysis in order to simulate potential portfolio returns over time.

When CMEs are updated each year in the Goal Tracker, your portfolio's projected performance and how you're tracking toward your goal will likely change as well. For shorter-term goals, you might see little difference in the projected ending value for your portfolio. For longer-term goals, the projected ending value might move meaningfully higher or lower in any given year. This is because small changes in CMEs can result in substantial changes in simulated returns that extend over long time horizons of several decades.

If you find that your portfolio has become "off target" or "at risk" as a result of the recent CME updates, consider increasing your recurring contributions, if possible. A small additional contribution has the potential to put you back on track depending on your investment timeframe. The good news is that just like small changes in CMEs can result in meaningful differences in projected returns over long horizons, a small increase in your savings rate when compounded over many years might be all that's needed to get you back "on track."

Invest with a goal in mind…and track progress along the way!

To effectively reach any goal, you need clear, concrete and trackable steps—and the ability to make adjustments along the way as things change. We built Goal Tracker to help make that process easier. This way you'll know where your investing goals stand, and you can focus on all the other important goals in your life.

David Koenig CFA®, FRM®, is Vice President and Chief Investment Strategist for Schwab Intelligent Portfolios