Retirement Income Cost

Retirement income costs rise while savings gains slow

Oct 15, 2015

What changed for retirement income?

  • The estimated cost of future retirement income for pre-retirees rose slowly but steadily in the third quarter as long-term interest rates stayed low.
  • Gains for those with savings in both 401(k)s and IRAs were lower than last quarter but managed to stay even with, or outpace, rising costs, despite stock markets’ finishing their worst quarter since 2011.
  • Pre-retirees can use the CoRI Indexes as a periodic gauge, amid volatility, of their retirement income estimate. That way they would have time, if needed, to start saving more, invest differently or change their retirement goals.

Chart: Retirement savings and estimated annual income

Retirement spending power fizzles

Nest eggs for workers in their 50s and early 60s largely withstood the third quarter’s sudden market downturn—but are showing cracks in the income they are estimated to produce later. Savings increased in the 6-12% range for pre-retirees with balances in both 401(k)s and individual retirement accounts (IRAs), as measured by the Employee Benefit Research Institute, compared with Sept. 30, 2014. But, this growth was offset by a nearly 7% rise in the cost of generating lifetime retirement income for 55-year-old workers.

The main contributor to those increased costs: Long-term interest rates’ remain low. With growing concerns about the global economy, pre-retirees should consider monitoring the CoRI Indexes periodically to see where they stand and if they need to save more, invest differently or adjust their retirement goals.

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