Are My Retirement Savings on Track?

How much should you have today in retirement assets to generate $1 in income at retirement?  This very basic, most important question can now be answered for those between the ages of 55 and 64, with a neat new tool from BlackRock called the CoRi Index.

This is the easiest calculator ever!  All you have to do is put your age in the calculator.

The calculator takes into account interest rates, inflation, risk, life expectancy, and starting point in deriving the number.  These inputs change on an ongoing basis; so, as time goes by, you want to be sure to recheck the number.  The calculator also can be used to flip the question around and estimate the amount you should have today to generate a given inflation adjusted income at retirement.

For example, if you put in 56 as your age, it derives $12.93.  This tells you that each $12.93 you have in retirement savings today can generate $1 in inflation adjusted income in retirement at age 65.  Thus, for example, if you have $193,618 in retirement assets, it can produce 193,618 /12.93 = $14,974 annually in retirement.

If, instead, you flipped it around and input $14,973 as the desired income in the first year of retirement, you'll find you need $193,616 today.  This use of the calculator will give you a really good idea if you are on track to meet your retirement goals.

If you play around a bit more with the calculator ,you'll see that you can easily calculate daily index values as shown in the table:

Source: BlackRock

These values were for 9/13/2013. Notice that the levels increase a bit more than 4.5% each year.  This is the amount your portfolio needs to grow once you are on track.  As a result, your portfolio needs to grow at least 20% in the last 5 years.  This  points to the observation that adverse markets can easily throw a plan off kilter and it, therefore, is probably not a good idea to get too smug as you approach retirement unless you are well over your targeted amount.

This post is for educational purposes only.  Readers should pay special attention to BlackRock's disclaimers.