BlackRock has launched a retirement income tool to help advisers have the sometimes difficult conversations with their clients about saving more for retirement.
Using the firm's retirement income indexes — known as CoRI, which stands for "cost of retirement income" — advisers will be able to show clients visually if their current retirement savings stack up to what they'll need when they stop working.
Advisers can plug in information such as the client's age, current retirement savings and retirement income goals to calculate what the client can expect to have after they retire. Advisers can adjust the inputs to show different scenarios.
"One of the biggest challenges is saving for and meeting their retirement," said Frank Porcelli, chairman of wealth advisory at BlackRock.
CROWDED FIELD
BlackRock's iRetire joins a crowded field of retirement income calculators.
Betterment came out with a retirement calculator in April, months before it launched Betterment for Business, which offers 401(k) plans. NextCapital, a robo-adviser focused on retirement,
came out with a 401(k) account aggregating dashboard in September that takes all assets into account for a client.
Mr. Porcelli says iRetire is more than a retirement calculator, though.
“It is meant to be an end-to-end asset management solution for clients' retirement issues,” he said. “It is meant to be a regular check in. It is a complete ecosystem for managing retirement.”
HOW MUCH IS ENOUGH?
Mr. Porcelli said many clients don't know how much money is enough money until they see it broken down per year as though it were a stream of income. He attributes part of the problem to the fact that many employees cannot rely on their employers to help them save for retirement as they could have decades ago.
"Individuals have become the sole person to drive and fund their own retirement," Mr. Porcelli said. "That's a complicated problem."
"Any level of savings is good," he said. "But when you tell people that [what they saved] will provide you $9,000 a year in income, that puts on a cleaner lens."
Roughly 31% of Americans have neither retirement savings nor a defined benefit plan,
Federal Reserve data found. That includes 19% of people between 55 and 64.
"There is a problem," Mr. Porcelli said.
Technology tools, such as iRetire, aim to change that, however.
CONVERSATION STARTERS
"Anything you can do to show people with some metrics where you will find yourself, those are great conversation starters," said Neil Bathon, an analyst with FUSE Research.
He said advisers are sometimes reluctant to deal with longer-term issues, so technology tools and platforms can assist in bridging the gap. In the future, he expects there will be deeper conversations on
Social Security, and where it may be in the next few decades, as well as non-plan assets for the plan participant and even health care costs.
Rob Foregger, co-founder of NextCapital, said retirement savings tools have been around for years, but advisers haven't taken advantage of them like they should.
"I call that view and do," Mr. Foregger said. "It is one thing to create a retirement income plan and another thing to implement it and manage it on an ongoing basis."
He added that as technology improves retirement calculators, advisers will likely begin using them more proactively.
