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February 13, 2014 at 09:03 AM
The top-of-mind question for many investors today is: “Do I have enough money to retire?”
Over the past 30 years, the retirement savings burden has devolved on individual investors as fewer American workers are covered by traditional defined benefit pension plans, once a major source of retirement income, according to asset manager BlackRock.
BlackRock’s 2013 Retirement Survey found that only 23% of 1,011 American workers who were saving for retirement felt confident that they would have enough money to live in retirement. Two-thirds of respondents blanched at the prospect of trying to live without employment income.
Last June, BlackRock introduced a series of indexes to help investors figure out their retirement income needs, and on Wednesday, the firm rolled out five mutual funds based on those indexes.
“The goal is to make complexity simple for investors,” Chip Castille, head of BlackRock’s U.S. and Canada defined contribution group, said during a press briefing.
A Quick Calculation
The BlackRock CoRI Retirement Indexes were designed to enable investors 55 and older to better plan for retirement by tracking the estimated cost of $1 of future, annual inflation-adjusted lifetime income starting at age 65.
The CoRI Index series focuses primarily on individuals from 55 to 64 years old. Each index is constructed with a view to the specific year in which those individuals will retire (assumed to be 65).
The current series includes 10 indexes, from the BlackRock CoRI Retirement Index 2014 through the BlackRock CoRI Retirement Index 2023. A new index will be added every year.
“The CoRI indexes enable pre-retirees to quickly estimate the annual lifetime income their current savings may generate once they turn 65,” Castille said.
BlackRock offers a tool to help investors use the indexes.
Here’s how it works. On its website, BlackRock offers the example of an investor who had saved $750,000 toward retirement as of last July 30, and will turn 65 in 2018.
This investor would divide the savings amount by $16.06—the closing price of the BlackRock CoRI Retirement Index 2018 on July 30—and find that his savings could fund approximately $46,700 of annual income in retirement.
