Retirement Income Cost

Retirement income outlook helped by rates, hurt by returns

Jan 3, 2016

What changed for retirement income?

  • Retirement spending power for workers in their mid-50s got a 4.41% boost in late 2015 compared with a year ago, mainly due to rising rates, as measured by BlackRock’s CoRI Retirement Indexes. But spending power fell by 6.4% for 60-year-olds, and was essentially flat, with a 0.74% uptick, for 64-year-olds — those closest to retirement1
  • Although the estimated cost of future retirement income declined significantly – by 4.05% for 55-year-olds2, for example — pre-retirees with savings in both 401(k)s and IRAs saw their nest eggs finish 2015 about the same size, or smaller, after a volatile year.
  • Pre-retirees can use the CoRI Indexes as a periodic gauge, amid rocky markets, to estimate annual retirement income potential and make any necessary adjustments to their savings and investing strategy.

Retirement savings and estimated annual income

Retirement spending power
improves for some, not all

For workers in their 50s to mid-60s, the end of 2015 brought both good news and bad news for retirement income prospects. On the plus side, the estimated cost of generating annual income in retirement fell 4.41% for 55-year-olds, 2.14% for 60-year-olds and a whopping 7.39% for 64-year-olds3.

The main reason why estimated annual retirement income got less expensive to generate from savings: Rising long-term interest rates. The 10-year Treasury yield curve climbed 4.6% Dec. 31, 2015, from the end of 2014. If those rates fall further this year, pre-retirees could see their future spending power go even farther.

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Chip Castille
Chief Retirement Strategist, BlackRock
Chip Castille, Managing Director, is BlackRock's Chief Retirement Strategist heading the Global Retirement Strategy Group. He is responsible for managing global ...