BlackRock, Inc. (NYSE: BLK) today launched an innovative series of
financial indexes that aim to fundamentally improve the way individuals
and their advisors plan and save for retirement.
The
BlackRock CoRI Retirement Index series (or the “CoRI Indexes”),
backed by the firm’s world-class analytics, will enable an investor or
advisor to calculate either of two critical figures: (1) how much
estimated annual income an investor’s savings will provide throughout
retirement, or conversely, (2) the level of savings an investor needs to
generate a desired amount of annual income throughout retirement.
Because the CoRI Indexes are designed to reliably translate savings into
estimated lifetime income, investors can also use a CoRI Index as a
benchmark for monitoring retirement portfolio performance relative to an
income goal, and/or in the course of designing and implementing a
retirement income-focused investment plan.
“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.”
Unlike traditional retirement planning “calculators” that rely on user
assumptions and hypothetical inputs to generate a result, the CoRI
Indexes are based on comprehensive, real-time market data and a
broad-based portfolio of fixed income securities.
The CoRI Indexes are designed to assist investors age 55 and older in
planning for retirement by tracking the estimated cost of $1 of future,
annual inflation-adjusted lifetime income beginning at age 65, better
equipping those investors to make necessary adjustments to their savings
or investing strategy during the “pre-retirement” period when good
planning and appropriate course-correction are vital.
The value or “level” of each CoRI Index in the series reflects the
performance of a portfolio of corporate US dollar-denominated bonds, US
government bonds and US Treasury STRIPS (Treasury securities with
separate interest and principal payments) that have been selected to
deliver a return that approximates the cost of a person’s lifetime
income as it fluctuates over time.
Based on proprietary methodology developed by BlackRock, a CoRI Index
level is designed to converge with the median price of an annuity at age
65.
The ability to provide such a tangible metric through the familiar and
transparent concept of an index makes the CoRI Index series an important
innovation for the retirement investment landscape.
“With all the uncertainty in the financial world, coupled with
ever-lengthening lifespans, what investors need most is a clear and
reliable way to see the years ahead,” said Castille. “A CoRI Index is a
powerful lens for bringing an investor’s future into sharp focus – in a
way that investors have never been able to achieve before.”
“Real Numbers” Providing “Real Answers”
The CoRI Index series is designed primarily for individuals from 55 to
64 years old. Each Index within the series is constructed with a view to
the specific year in which those individuals will retire (assumed to be
at the age of 65). The current series includes 10 Indexes, from the
BlackRock CoRI Retirement Index 2014 (NYSE: CORI2014) through the
BlackRock CoRI Retirement Index 2023 (NYSE: CORI2023). A new index will
be added every year.
In each case, a CoRI Index will provide a single number that a saver can
use to calculate the amount of money needed today for every dollar of
estimated annual income he or she wants in retirement.
As an example – using the BlackRock CoRI Retirement Index 2018 closing
price on Tuesday, July 30, an investor who has saved $750,000 toward
retirement as of July 30 and will turn 65 in the year 2018 would divide
$750,000 by the CoRI Index 2018 level of $16.06 – and determine that
those savings could fund an estimated $46,700 in annual income in
retirement. Alternatively, the same investor wanting to fund $65,000 in
annual income at retirement would multiply $65,000 by $16.06 – and
determine that as of July 30, a nest egg of $1,043,900 would be required
to achieve that goal.
“The CoRI Indexes use real numbers to provide real answers that
transform the unknown into the known, translating today’s
retirement savings into an estimate of future
annual income,” said Matthew O’Hara, Managing Director and head of
Research and Product Development for BlackRock’s Defined Contribution
group. “It is a set of living, breathing indexes that will offer a
valuable, forward looking picture of annual retirement income for those
investors within 10 years of retirement.
“The bond portfolio that underlies each index is the most significant
innovation, representing a dynamic, market based approach for tracking
income pricing that gives investors unique insight into their progress
toward their income goals,” O’Hara said.
A CoRI Index’s quantitative inputs include: the individual’s age and
years to retirement (at 65); current interest rates; the average price
of immediate annuities (as a proxy for the price of lifetime income);
and average life expectancy rates. The calculation of each Index
includes a cost of living adjustment (COLA) that is set at inception by
considering yields for US Treasury Inflation Protected Securities (the
TIPS curve) and observed historical inflation over time, as a measure of
real inflation rates. BlackRock plans to use the TIPS curve as input for
setting the COLA for future indexes as well.
Index values will be published daily and, like any other widely known
financial index, will be available to investors and advisors via major
financial information outlets and will also be available on
BlackRock.com. As an index value or level changes, savers will be able
to track, in real time, changes to the estimated “price” of future
retirement income and the impact on the level of savings needed for the
income they want.
The CoRI Indexes will be calculated using the services of Interactive
Data, a leading global provider of financial market data and
index-related solutions.
“This is an innovative new range of indices that will help many people
with their retirement planning and we are excited to work with BlackRock
to provide independent index calculation and distribution to support the
CoRI Indexes,” said Mark Hepsworth, President of Pricing & Reference
Data at Interactive Data.
The CoRI Indexes were designed with the assistance of BlackRock
Solutions, BlackRock’s industry-leading provider of risk management,
advisory, and enterprise investment system services.
"At the same time that a CoRI Index helps investors understand their
retirement income needs, the bond portfolio that underlies the Index can
be the basis for the development of innovative investment products that
help enable those same investors to effectively plan for their future
retirement income requirement,” O’Hara said.
To help clients use the CoRI Indexes quickly and effectively, BlackRock
has also developed an online
tool called CoRITM. More than a simple calculator, CoRI
delivers in seconds a clear and intuitive “translation” between
retirement savings and estimated annual retirement income, allowing for
more personalized and dynamic retirement planning.
Taking the Guesswork Out of Generating Retirement Income
BlackRock is introducing the CoRI Indexes as a direct response to
growing awareness among millions of Americans that they need to take
steps to position themselves to achieve a certain level of income for
their post-employment years.
BlackRock’s 2013 Retirement Survey, the results of which are expected to
be released by BlackRock this fall, revealed that just 23
percent of 1,011 American workers saving for retirement feel confident
that they will have enough money to live in retirement; 66 percent
agreed that “I am nervous at the prospect of trying to live without
employment income.”
A diminishing number of Americans are covered by traditional defined
benefit (DB) pension plans, at one time a dominant source of retirement
income. Just 31 percent of workers polled by BlackRock in 2013 were
covered by a DB plan at their current place of employment. The incidence
of such plans drops dramatically with age – just 27 percent of surveyed
workers age 35 and under have DB coverage, contrasted with 46 percent of
workers age 60 and over.
“We’ve shifted the retirement savings burden to individual investors and
in doing so have tasked them with the impossible – how does someone know
exactly how much to save when they don’t know how long they are going to
live?,” said Castille. “Up to this point, all people have been able to
do is guess at how big their nest egg needs to be in order to get the
lifelong income they want.”
“Workers in their 50’s in particular can’t just rely on estimates or
guesses – they need to understand with certainty whether their savings
will provide enough income to support their desired lifestyle in
retirement,” he said. “We have created the CoRI Indexes to help address
this challenge.”
About BlackRock
BlackRock is a leader in investment management, risk management and
advisory services for institutional and retail clients worldwide. At
June 30, 2013, BlackRock’s AUM was $3.857 trillion. BlackRock helps
clients meet their goals and overcome challenges with a range of
products that include separate accounts, mutual funds, iShares®
(exchange-traded funds), and other pooled investment vehicles. BlackRock
also offers risk management, advisory and enterprise investment system
services to a broad base of institutional investors through BlackRock
Solutions®. Headquartered in New York City, as of June 30,
2013, the firm had approximately 10,700 employees in 30 countries and a
major presence in key global markets, including North and South America,
Europe, Asia, Australia and the Middle East and Africa. For additional
information, please visit the Company's website at www.blackrock.com.
The CoRI Retirement Indexes commenced ongoing calculation on June 28,
2013. BlackRock Index Services, LLC, a subsidiary of BlackRock, Inc.
designs, sponsors and publishes indices for use in portfolio
benchmarking, and portfolio management. The BlackRock CoRI Retirement
Indexes, allocations and data are subject to change.
The CoRI Retirement Indexes do not guarantee future income or protect
against loss of principal. There can be no assurance that an investment
strategy based on the CoRI Retirement Indexes will be successful.
Indexes are unmanaged and one cannot invest directly in an index.
This information is the property of BlackRock, Inc. and /or its
subsidiaries (collectively, "BlackRock"). It is provided for
informational purposes only. The CoRI Retirement Indexes are supported
by proprietary BlackRock research about annuity pricing and income
generation; the methodology of the CoRI Retirement Indexes are supported
by assumptions about the relationship between annuity pricing and fixed
income markets, the accuracy of third party reporting and compilation of
current annuity pricing, and the predictive nature of the components of
the methodology. There is no assurance that these assumptions are
correct or will perform in the manner that they have in the past. Nor
may it be used in the creating, writing, offering, trading, marketing or
promotion of any financial instruments or products. Although BlackRock
shall obtain information from sources which BlackRock considers
reliable, none of the BlackRock, its subsidiaries or any other third
party involved in, or related to, compiling, computing or creating the
information (collectively, the "BlackRock Parties") guarantees the
accuracy and/or the completeness of any of this information. All
BlackRock indices and data are the exclusive property of BlackRock and
may not be used in any way without the express written permission of
BlackRock.
Reliance upon information in this material is at the sole discretion of
the reader. The Information may not be used to verify or correct other
data, to create indices, risk models, or analytics, or in connection
with issuing, offering, sponsoring, managing or marketing any
securities, portfolios, financial products or other investment vehicles.
Historical data and analysis should not be taken as an indication or
guarantee of any future performance, analysis, forecast or prediction.
None of the Information or BlackRock index or other product or service
referenced herein constitutes an offer to buy or sell, or a promotion or
recommendation of, any security, financial instrument or product or
trading strategy. Further, none of the Information or any BlackRock
index is intended to constitute investment advice or a recommendation to
make (or refrain from making) any kind of investment decision and may
not be relied on as such. The Information is provided "as is" and the
user of the Information assumes the entire risk of any use it may make
or permit to be made of the Information.
NONE OF BLACKROCK, INC. OR ANY OF ITS SUBSIDIARIES OR ITS OR THEIR
DIRECT OR INDIRECT SUPPLIERS OR ANY THIRD PARTY INVOLVED IN THE MAKING
OR COMPILING OF THE INFORMATION (EACH, A "BLACKROCK PARTY") MAKES ANY
WARRANTIES OR REPRESENTATIONS AND, TO THE MAXIMUM EXTENT PERMITTED BY
LAW, EACH BLACKROCK PARTY HEREBY EXPRESSLY DISCLAIMS ALL IMPLIED
WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. WITHOUT LIMITING ANY OF THE FOREGOING AND TO THE
MAXIMUM EXTENT PERMITTED BY LAW, IN NO EVENT SHALL ANY OF THE BLACKROCK
PARTIES HAVE ANY LIABILITY REGARDING ANY OF THE INFORMATION FOR ANY
DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL (INCLUDING LOST
PROFITS) OR ANY OTHER DAMAGES EVEN IF NOTIFIED OF THE POSSIBILITY OF
SUCH DAMAGES. The foregoing shall not exclude or limit any liability
that may not by applicable law be excluded or limited.
BLACKROCK, CoRI, and the CoRI logo are registered and unregistered
trademarks of BlackRock, Inc. or its subsidiaries.
Copyright Business Wire 2013