“With three levers in operation, it’s quite possible for a fund to succeed according to total return but fail as measured by projected income,” he wrote.
The Wall Street Journal last month described the approach as a way for investors to get “a clearer picture of whether they are nearing their retirement-savings goals by focusing less on the dollar amounts they’ve accumulated and more on how much income that money can generate in the future.”
That’s why we created the BlackRock CoRI Retirement Indexes – to shift our focus away from the total value of the nest egg, and instead toward the annual income it could provide, starting at age 65. We take the information gleaned from the indexes to help you build a better retirement strategy, as I discussed in a previous post. So what did we learn in our fourth-quarter analysis of the indexes? The estimated cost of future lifetime retirement income for 55-year-olds jumped 33.28% in the 12 months that ended Dec. 31. Meanwhile, median retirement savings portfolio for 55-year-olds climbed 14.07% to $280,035, mainly due to strong equity markets. But those gains were effectively wiped out by the increasing costs involved in generating future income from those assets. (The savings total includes 401(k) accounts and individual retirement accounts (IRAs), as tracked by the Employee Benefit Research Institute (EBRI).)
Do we have you wondering yet how much annual income your own retirement savings might provide? We developed a tool to help answer that question. Check in on that number – and do so often. It might give you just the incentive you need to keep your resolution to save more – and to sock away any bonuses you get rather than spending them now.
Chip Castille, Managing Director, is head of the BlackRock US Retirement Group. You can find more of his posts here.