BlackRock's New Retirement Tool Translates Savings into Annual Income


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Retirement saving can be a scary topic, no matter if you're 25, 35 or 65. There are so many options and things to consider when putting money aside for your retirement. How much do I save? How much should I have in income? These questions and more are enough to give anyone a headache. That's why BlackRock (BLK) has created CoRI, the CoRI Retirement Index, a series of indexes used to help those close to retirement figure out how much of your savings can be used for annual income once you turn 65.

Launching a series of 10 initial indexes, starting with BlackRock CoRI Retirement Index 2014 (NYSE: CORI2014) through the BlackRock CoRI Retirement Index 2023 (NYSE: CORI2023), BlackRock has created a series of indexes used to show how much money saved today will help retirees tomorrow. This is an important issue, with roughly 45% of workers guessing what they need for retirement.

BlackRock chose to start the first index 10 years before an individual turns 65, and there's plenty of data to support that it's plausible to reasonably forecast what will happen ten years from now. A new index will be added every year.

Everyone is worried about retirement income, much more than just looking at the lump sum you have saved in your IRA and 401k accounts. With companies passing retirement saving planning more and more to its employees (66% of people are nervous about retiring without employment income), it's important that people use all the tools available to them to figure out how much they need, and how long it will last them.

"The CoRI Indexes will deliver truly groundbreaking support for investors grappling with today's most critical financial planning question: 'Do I have enough money to retire?'", said Chip Castille, Managing Director and head of BlackRock's US & Canada Defined Contribution Group. "By distilling investors' retirement income need into a single number that can be accessed easily and checked regularly, the CoRI Indexes will offer an invaluable new starting point for retirement planning as well as support better informed discussions between investors and advisors on strategies for securing critical retirement income."

The CoRI indexes trade on the New York Stock Exchange just like the S&P 500 or the Dow Jones, and are geared towards people ages 55-64, known as "pre-retirees." Retirement plans typically don't solve all the answers that people close to retiring have, such as retirement goals, liquidity, inflation protection, and ensuring you don't run out of money. The indexes, as well as the CoRI website, provide tools that pre-retirees, and those interested in retirement planning, can use to best prepare for retirement saving.

CoRI is a suite of U.S. bond indexes that allow an investor to see how much it costs to fund a retirement. Investors need to be aware that volatility plays a part in retirement planning, and the cost could go up or down, depending on a wide variety of factors. Since it's an investable index, made up of U.S. Treasuries, U.S. Treasury STRIPS (fixed-income securities sold at a significant discount to face value with no interest payments), and corporate bonds from the Industrial, Utility and Financial sectors.

Not only is BlackRock creating the CoRI indices, it's also created a calculator that anyone can use to figure out how much one needs to save for a comfortable income level during retirement. If you've fallen behind your goals for retirement saving, the calculator shows how much you need to save to catch up.

If you have $1 million currently saved for retirement and you're going to retire in 2018, the calculator will show that you're annual income in retirement will be approximately $62,266 (based off the July 30 price of the CoRI index).

If you have a set annual income for your retirement years in mind, say $70,000 per year, the CoRI calculator will show how much you need to save to get to that goal.

CoRI can be used not only as a retirement tool and calculator, but also as a benchmark to see how you're doing with regards to your goals. However, there could be a big difference between how your own portfolio is doing, versus the indexes.

CoRI is comprised of several factors, as part of a two-part process. First, it uses the cash flows needed to fund retirement. Then, it uses inflation expectations, interest rate changes, an adjustment for mortality, as well as something known as longevity pool risk premium, to come up with the final CoRI index level.

With so many people getting closer to retirement in the 55-64 age group range, BlackRock created an innovative family of bond indexes to make it easy to calculate how much income you'll need to retire. Combined with the advice of a financial advisor and BlackRock's suite of CoRI indexes, it'll make it easier to figure out your retirement goals before you reach retirement.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Personal Finance , Retirement , Bonds , Investing Ideas
Referenced Stocks: BLK

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Chris Ciaccia

Chris Ciaccia

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