Sample Portfolio Scenarios - Assumptions and Methodology:
The three sample portfolios represent illustrative asset class allocations. See "About the Asset Classes" below for descriptions of the asset classes. The asset classes were selected to broadly reflect a mix of equity and bond allocations associated with different risk tolerances of investors in pre-retirement. The assigned risk level of each sample portfolio (Conservative, Moderate and Moderate with CoRI exposure) depends on the allocation to fixed income. The "Moderate with CoRI exposure" sample portfolio replaces the "Moderate" sample portfolio’s traditional fixed income allocation with exposure based on the CoRI Retirement Indexes. This third sample portfolio is intended to show the potential role of including a fixed income allocation designed to track the estimated cost of future lifetime retirement income. Other asset classes not considered in the portfolio illustrations may have characteristics similar or superior to those included in the analysis. An investor’s retirement needs may be influenced by a variety of factors that are not included in this analysis. Investors should consult with their advisors to help evaluate their retirement needs and consider the information provided by the CoRI tool.
Additional Annual Savings
The additional required savings is estimated by calculating the savings rate that will make your estimated annual retirement income equal your desired annual retirement income, within the range shown, at age 65. This calculation considers your current retirement savings, the assumed return of the sample portfolio and the assumed return of additional annual savings over time. The assumed return of the sample portfolio is calculated using each applicable asset class’s assumed return. Please refer to the Long-term Capital Market Assumptions discussion below for the assumed return and assumed risk figures for each asset class.
Annual Retirement Income Range
The annual retirement income range represents a projected range of estimated annual retirement income derived by first growing your current retirement savings and additional annual savings from now until age 65 by the assumed return of the sample portfolio shown. The assumed return of the sample portfolio is calculated using each applicable asset class's assumed return. Next, your projected sample portfolio balance at age 65 is divided by your corresponding projected CoRI Retirement Index level in order to calculate an average estimated annual retirement income. The low and high estimates reflect the assumed volatility (risk) of the components of the sample portfolio, as well as the assumed volatility (risk) of lifetime retirement income costs as measured by BlackRock’s CoRI methodology.
These annual retirement income estimates are generated using Monte Carlo simulation, which is a statistical modeling technique that forecasts a set of potential future outcomes based on the variability or randomness associated with historical occurrences. These estimates are projections based on the probability or likelihood of generating a particular level of retirement income. These figures include a range of the estimated average annual retirement income, showing a low and high value at a 68% confidence level. This reflects a 68% probability that an investor's estimated annual retirement income will fall within the range shown. Projections are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. No representation is made that an investor will achieve results similar to those shown. Actual retirement income could be higher or lower based upon a number of factors and circumstances not addressed herein.
Long-term Capital Market Assumptions (4Q 2016):
Long-term capital market assumptions refer to BlackRock's return, risk and correlation expectations for each asset class. (Correlation measures how asset classes move in relation to each other). These assumptions are based on historical asset class returns (as reflected by certain indices), proprietary models, BlackRock's subjective assessment of the current market environment and forecasts as to the likelihood of future events.
|U.S. Equities||S&P 500 Index||4.90%||15.44%|
|U.S. Bonds||Barclays U.S. Aggregate Bond Index||1.85%||4.07%|
|CoRI exposure||BlackRock CoRI Retirement Indexes||3.10%||13.82%|
BlackRock typically reviews the assumptions quarterly. Long-term capital market assumptions are subject to high levels of uncertainty regarding future economic and market factors that may affect actual future performance. There is no guarantee that the capital market assumptions will be achieved, and actual returns could be significantly higher or lower than those shown. Capital market assumptions should not be relied on as a forecast or prediction of future events, and they should not be construed as guarantees as to returns that may be realized in the future from any asset class described herein. Ultimately, the value of these assumptions is not in their accuracy as estimates of future returns, but in their ability to capture relevant relationships and changes in those relationships as a function of economic and market influences.
Because of the inherent limitations associated with the use of illustrative asset allocations based on capital market assumptions, investors should not rely exclusively on the asset allocations shown in the CoRI tool when making an investment decision. The illustrative asset allocations cannot account for the impact that economic, market, and other factors may have on an actual investment portfolio. Unlike actual portfolios, the asset allocations shown in the CoRI tool do not reflect actual trading, liquidity constraints, fees, expenses, taxes and other factors that could impact an investor's realized future returns.
Past performance is no guarantee of future results.
About the Asset Classes
U.S. Equities are based on the S&P 500 Index, which is designed to measure returns and risk associated with U.S. equity related investments.
U.S. Bonds are based on the Barclays U.S. Aggregate Bond Index, which is designed to measure returns and risk associated with the total U.S. investment-grade bond market.
CoRI exposure is based on the BlackRock CoRI Retirement Indexes, which are a suite of fixed income indexes designed to track the estimated cost of future lifetime retirement income.
Indexes are unmanaged and one cannot invest directly in an index.
Asset allocation and diversification strategies do not guarantee a profit and may not protect against loss. The two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments.
IMPORTANT: The projections or other information generated by the CoRI tool regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time.
This information should not be relied upon as investment advice, research, or a recommendation by BlackRock regarding (i) the use or suitability of the indexes or (ii) any security in particular. Investors should consult their financial advisor to evaluate their investment needs.
The CoRI Retirement Indexes and the CoRI tool 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 or the CoRI tool will be successful. Indexes are unmanaged and one cannot invest directly in an index.
Investing involves risk, including possible loss of principal.
The CoRI Retirement Indexes and data are subject to change. Data shown is for informational purposes only and does not represent an actual account. The CoRI tool is based on CoRI Retirement Index levels that are updated daily, so results may vary with each use and over time. The CoRI Retirement Indexes and CoRI tool do not reflect the fees, expenses and cost that may be associated with an annuity or any other retirement income product that an individual may purchase, or any assumption that such a product will be available for purchase at the time of retirement. Actual investment outcomes may vary. Although the CoRI tool provides an estimate of the amount of money you need today for every dollar of annual income you want in retirement, this estimate is not a guarantee. A number of factors may contribute to variations in retirement income.
The CoRI Retirement Indexes are maintained by BlackRock Index Services, LLC (the "Affiliated Index Provider"), a subsidiary of BlackRock, Inc., that designs, sponsors and publishes indices for use in portfolio benchmarking and portfolio management. While the Affiliated Index Provider publishes descriptions of what the CoRI Retirement Indexes are designed to achieve, the Affiliated Index Provider does not provide any warranty or accept any liability in relation to quality, accuracy or completeness of data in respect of the CoRI Retirement Indexes, and does not guarantee that the CoRI Retirement Indexes will not deviate from their stated methodologies. The Affiliated Index Provider does not provide any warranty or guarantee for Affiliated Index Provider errors.
Prepared by BlackRock Investments, LLC ("BRIL"), member FINRA. BRIL is a subsidiary of BlackRock, Inc.
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