Navigating the retirement window: Introduce more certainty to outcomes

For most savers, the primary objective of their financial plan is to ensure they have sufficient funds to meet their spending needs during retirement. Despite this intention, taking action can be daunting due to the uncertainty surrounding a new phase of life and a lack of information around critical decisions that must be made.

These are some reasons why, when it comes to retirement, many Americans are unprepared. A Federal Reserve study found that 25% of working Americans have no retirement savings, and half of those with accounts had savings less than $87,000.¹ The same study found that half of Americans aged 55-70 with accounts have savings of less than $200,000. These statistics, as well as the self-reliance stemming from the shift from defined benefit to defined contribution plans, highlight the need for improving retirement readiness.²

In order to improve retirement outcomes, at BlackRock, we believe a lifecycle investment solution should integrate real-world data across three primary risks: income risk, longevity risk, and markets risk. These primary and related risks are not stagnant and vary in importance and magnitude over time. What our latest research has found is that these risks are magnified during the period in which individuals approach retirement and during the early years of retirement. This period between the ages of 55-70 where uncertainty is heightened, we refer to as the “Retirement Window.” Across this short period of time, retirement outcomes are either influenced by variables beyond our control, or if controllable, shaped by a few pivotal decisions that bear long-term consequences.

In this new paper, we highlight areas of uncertainty during the Retirement Window and examples of critical decisions that most seem to miss or misunderstand.

The Retirement Window can be a stressful period, and the data proves it. BlackRock’s Read on Retirement® Survey found that 71% of respondents worry that they’ll outlive their retirement savings, and 74% say that certainty around income in retirement would have a positive impact on their mental health.³ We are here to help. What is clear to us is that while there are a million paths to retirement, most individuals prefer the path with most certainty. We believe that as retirement savers approach retirement, their circumstances change, and their retirement solution should evolve with them.

That’s why LifePath is not just an exercise in maximizing returns or having a sole focus on market risk. It’s about anticipating and mitigating the various risks that come with each life stage and delivering choices that allow savers to increase certainty around their personal retirement outcomes.