retirement

BlackRock, the world’s largest money manager, unveiled an elegantly simple tool  today to answer would-be retirees’ most basic question: Will my savings last?

Its new “Cori” index, now on the New York Stock Exchange, tracks the purchasing power of retirement income. Its explained in our story today.

But what may be of greater help to people between the ages of 55 and 65 is the accompanying calculator, which allows users ti punch in a few numbers and get a quick benchmark.

For example, if you’re 60 and have $1 million saved, it shows you can generate $62,305 a year in retirement income starting in 2018. (Note: That example was based on July 19 data.)

“It’s almost impossible even for people who have studied finance to be told at age 55 to take their assets and project them out to age 65 and calculate what annuity prices are going to be at that time,” says Jack VanDerhei, research director at the Employee Benefit Research Institute. a nonprofit in Washington.

“For the vast majority of defined-contribution plan participants, I think this is going to simplify it to the point that they can understand what they’re facing in terms of a shortfall,” VanDerhei says. “If this actually gets used the way it is intended to, I think it’s going to be a huge help.”

BlackRock’s index and accompanying tool assume a constant inflation rate of 2.5%. That’s because it’s tough to find annuities linked to the consumer-price index, and doing so could increase the cost to the point that people think they don’t have enough money to retire, says Chip Castille, head of the firm’s U.S. and Canada defined-contribution group.

Plus, retirees who receive Social Security retirement benefits already get a cost-of-living adjustment linked to inflation, VanDerhei says.

Theres still a missing link, he says, and youll have to figure it out for yourself: the amount of income youll need each year in retirement. Some asset managers are working on better ways to estimate costs, including medical expenses. But theres no simple way so far to tailor income needs to the individual. Rules of thumb range from 75% to more than 100% of preretirement income.

To get a better handle on that number, it still makes sense to sit down and make an old-fashioned budget, perhaps with an assist from online tools. And closer to retirement, you may want to consult a financial planner to make sure you dont miss any big expense categories looming ahead and that you put together your retirement income in the most tax-efficient way you can.

Meanwhile, if you try out BlackRocks tool, please let us know: Are you on track? Were you surprised by being either ahead of or behind where you expected to be in your savings goals?