Most DC plans have evolved over time, shaped by regulation, mergers, benefit changes and good intentions that may or may not be working as hard for participants as they could.
Now, it’s time to take a step back and evaluate what’s working and where change is warranted, because DC plans have become the foundation of retirement security for millions of people. But before a plan makes changes, it needs a firm understanding of the likely impact. And that information has been tough to come by.
Enter BlackRock’s new Future in Focus™ technology. It uses BlackRock’s proprietary data analytics and risk management systems to help a plan sponsor project the likely retirement income replacement ratio for participants—based on current savings behavior and key plan features. This tool also helps plan sponsors go a step further by quantifying how various plan changes (like auto-escalation and reenrollment) can improve these outcomes—valuable insight in cases where current projected savings may fall short in providing retirement income.
Future in Focus Technology at Work
Many plan sponsors understand that participants may have a gap between the savings they have today and the income they want in retirement. But that gap has been tough to quantify. BlackRock’s Future in Focus is designed to help, using sophisticated calculations to produce a comprehensive view of potential future outcomes.
So, how does it work? Simply enter participant characteristics such as salary and expected retirement age. Then plan characteristics, such as the company match formula and auto-features, and finally investment allocations. The technology then uses BlackRock analytics to simulate projected returns and contributions to estimate the participant’s projected balance at retirement. In other words, all the variables are turned into a single measurable range focused on one question: Will it be enough?
If not, BlackRock’s Future in Focus technology lets a plan sponsor run “what if” scenarios that illustrate the potential impact of such plan features on employee savings and projected ranges of outcomes and, as a result, identify the plan’s biggest opportunities to strengthen participants’ retirement readiness.
Take, for example, a 44-year-old investing 100% of his DC savings in a money market fund. That’s typical for longer tenured employees who joined a plan before many plans put new default options into place—and when defined benefit plans were still a major source of retirement income.
Future in Focus technology can be used to project the future retirement income replacement ratio if the participant remains invested the same way—and then measure the potential effect of changing his asset allocation, increasing his deferral rate, or both. Now, the plan sponsor has data to help shape recommendations for such changes as a plan reenrollment.
Powering Informed Decisions
At BlackRock, we’re dedicated to helping plan sponsors understand how DC plan best practices can directly shape the retirement success of participants. Future in Focus allows us to work with plan sponsors to quantify potential outcomes with meaningful data. Plan sponsors are then armed with the data they need to make informed decisions that help get their plans and participants on the path to retirement readiness.
For more information on how BlackRock Future in Focus can help you strengthen your participants’ retirement readiness, please email FutureInFocus@blackrock.com
IMPORTANT: The projections or other information generated by the tools described regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time. The CoRI Retirement Indexes do not guarantee future income or protect against loss of principal. There can be no assurance that an investment strategy based on the CoRI Retirement Indexes will be successful. Investing involves risk, including possible loss of principal. Asset allocation models and diversification do not promise any level of performance or guarantee against loss of principal. The principal value of a target date fund is not guaranteed at any time, including at and after the target date. Bonds fluctuate in price so the value of an investment can go down depending on market conditions. Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments.
The opinions expressed may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non- proprietary sources deemed by BlackRock, Inc. and/or its subsidiaries (together, “BlackRock”) to be reliable. No representation is made that this information is accurate or complete. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. This material does not constitute a recommendation by BlackRock, or an offer to sell, or a solicitation of any offer to buy or sell any securities, product or service. The information is not intended to provide investment advice. BlackRock does not guarantee the suitability or potential value of any particular investment.
Prepared by BlackRock Investments, LLC, member FINRA.
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