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For advisor or investment professional use only
Rethinking Retirement Spending: New Insights and Strategies for Decumulation
Ross Znavor, Head of Commercialization,
BlackRock Digital Wealth Solutions
For advisor or investment professional use only
You need tools & resources to help your clients
10 Things Essential Advisors Do…
1. Clearly identify their expertise and work with investors whose needs are closely aligned
2. Put the investor’s goals first and foremost
3. Help investors cut through the noise
4. Work to understand each client’s personal circumstances, values, investing style and
goals
5. Develop and carefully monitor a personal plan for each client, and make timely portfolio
adjustments to meet changing circumstances and needs
6. Receive the first call when a client is faced with a life transition, responding with true care
and concern
7. Help the investor understand fees and expenses—and the value provided for those
dollars
8. Tailor communication, education and the overall client experience to meet the unique
needs, style and concerns of each client
9. Communicate clearly, truthfully and consistently
10. Effectively utilize technology to maximize the time spent with clients
“Empowering the
Essential Advisor”
For advisor or investment professional use only
Overview of BlackRock
research and Retirement
Investment Framework
Importance of having a retirement spending framework
3
Today’s
goalsExplain how the financial
landscape for future retirees will
most likely be more
challenging, requiring different
savings and spending
behaviors
Jumpstart a conversation
that could significantly
impact your business and
business model
Review recent retiree
spending research that
challenges industry
assumptions and lifecycle
product designs for this
burgeoning client base
For advisor or investment professional use only
4
1 Source: BlackRock; data as of December 31st, 2017.
2/3of assets related
to retirement
70+ offices in
30 countries
$6.3T1
assets under
management
BlackRock understands
that our firm has a
special responsibility to
assist people all over the
world live out their later
years in dignity and
security
BlackRock’s commitment to retirement
Longevity is the defining challenge of our age.
We need to make sure it’s a blessing, not a curse.
- Larry Fink, CEO, BlackRock“
“
For advisor or investment professional use only
We have passed the demographic tipping point
5
401(k) contributions and distributions (billions)
Source: Private Pension Plan Bulletin Historical Tables and Graphs 1975-2014. U.S. Department of Labor. 2016. Pg. 25.
For advisor or investment professional use only
Good news: The legions of retirees looking for advice will only grow…fast
6
Source: Advisors and Retirement Income Support, September 30, 2016.
Net change in retirement income clients served
Significant increase Modest increase No change Modest decrease Significant decrease
For advisor or investment professional use only
Bad news: Retiree’s want to maintain a lifestyle they are accustom to… without spending their wealth
7
Source: Phoenix Marketing International; Cerulli Associates based on 7,800 households responding to on-line survey. As of June 30, 2016.
0%
10%
20%
30%
40%
50%
60%
Assurecomfortablestandard of
living inretirement
Protect currentlevel of wealth
Improvehousehold cash
flow
Aggressivelygrow wealth
Leave an estatefor heirs
Minimizeincome andcapital gains
taxes
<$500k $500k-$2m >$2m All retirement market households
• Retirement households’ most important financial goal, 2Q 2016
For advisor or investment professional use only
Case study: Retirement spending research
8
Data
For illustrative purposes.
Sample 1:
7,148 households from HRS
with available asset, out-of-
pocket medical expenditure
and income data
Sample 2:
A subset of sample 1 with
1,660 households for which
biennial household
expenditure data is also
available for the years 2005 –
2015.
Data:Health & Retirement Study
(HRS, 1992-2014)
Consumption and Activities Mail Survey
(CAMS, 2005-2015)
Objective:
Analyze how
spending and liquid
assets change after
retirement
For advisor or investment professional use only
Spending retirement assets…or not?
9
The vast majority haven't been
spending their retirement savings—
leaving nest eggs mostly untouched
and living on ready sources of income.
Future retirees may be less fortunate.
− BlackRock Retirement Institute
Spending retirement assets…or not? white paper
“ “
For advisor or investment professional use only
Assets remain relatively flat throughout retirement
10
Source: Employee Benefit Research Institute (EBRI) estimates based Health & Retirement Study (HRS, 1992-2014) Consumption and Activities Mail Survey (CAMS, 2005-2015).
1. All numbers measured in 2015 dollars.
Notes:
Pre-retirement assets as last observed before retirement
Lowest wealth = Pre-retirement assets $0-$200k
Medium wealth = Pre-retirement assets $200k-$500k
Highest wealth = Pre-retirement assets >$500k
23% drop
from pre-
retirement
asset levels20% drop
from pre-
retirement
asset levels
17% drop
from pre-
retirement
asset levels
Median non-housing household assets1
For advisor or investment professional use only
More than 1/3 of households grew their assets in retirement
11
Percent of assets remaining at year 17-18 post retirement1
Source: EBRI estimates based on Health & Retirement Study (HRS, 1992-2014) Consumption and Activities Mail Survey (CAMS, 2005-2015).
1. As a percentage of initial retirement assets. Criteria for Lowest, Medium and Highest Wealth is defined on slide 12.
Lowest wealth Medium wealth Highest wealth
For advisor or investment professional use only
Retirement income is predominantly sourced from social security and pensions
12
Source: Health & Retirement Study (HRS, 1992-2014) Consumption and Activities Mail Survey (CAMS, 2005-2015).
Notes: Criteria for Lowest, Medium and Highest wealth is defined on slide 12.
Retirement Income Sources (Average)
Labor Capital Pension/Annuity Social security
For advisor or investment professional use only
Looking ahead… the environment will most likely be more challenging, requiring different savings and spending behaviors
13
1. EBRI, What are the trends in U.S. retirement plans? 2015 2. Social Security Administration Report, 2017 3. CDC Life Expectancy Tables 2015
4) Morningstar, Decade returns represent the annualized return of the IA SBBI US Intermediate term TR Index. BII Assumptions use the Bloomberg Barclays Long Government TR Index. All Data as of
12/31/17.
Average annual coupon4
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