BlackRock and the Bipartisan Policy Center Chart a Path to Optimized Retirement Spending in New Paper

Washington, DC – Americans saving for retirement could benefit from a holistic approach to planning that considers guaranteed income, optimal asset allocation, and Social Security claiming, according to new research released by BlackRock, a leading asset manager, and the Bipartisan Policy Center, a leading Washington-based think tank. Paving the Way to Optimized Retirement Income examines the challenges Americans face when planning to spend their retirement savings, and how the public and private sectors can work together to find solutions to help savers.

As the report highlights, Americans with access to a retirement plan are frequently encouraged to save, but guidance on how much to spend once they reach retirement is lacking. “Retirement spending is one of the hardest problems retirees face, so the industry needs to give people affordable, innovative solutions and tools to help them navigate this challenge. We did this research because we think more people could use these levers if they knew about the benefits they can provide,” said Matt Soifer, head of distribution for BlackRock’s Retirement Business.

“The role of policymakers should be to make it as easy as possible for Americans to turn their hard-earned savings into income in retirement. Congress has made significant strides in recent years in the SECURE bills, but there’s more work to be done,” said Jason Fichtner.

The research outlines key findings and examples based on a typical American worker’s financial situation when they are ready to retire:

• Savers should consider a three-step framework to help chart their path to retirement spending: (1) determine retirement objectives, (2) consider key risk factors, and (3) formulate a holistic strategy.
• Pulling a few levers within this framework, such as increasing Social Security benefits by claiming later and adding guaranteed income, can significantly boost spending power.
• For an average worker aged 65, adding guaranteed lifetime income and adjusting asset allocation resulted in nearly 30% more annual spending from savings alone (excluding Social Security) and reduced downside risk by 33% (compared to a standard 60/40 portfolio).
• Delaying the claiming of Social Security benefits can generate even more annual spending and further reduce downside risk.

Taken together, these strategies have the potential to extend retirement spending power well beyond the average person’s lifespan, providing a higher “spending floor” into a retiree’s 90’s and beyond.

The paper notes policymakers and the private sector each have an important role to play to help Americans understand what they can do to optimize their spending in retirement. While SECURE 2.0 demonstrated important progress to advance retirement security, the research proposes additional policy measures that could have a meaningful impact to help savers. Increasing participation through auto-enrollment and auto-escalation, minimizing early withdrawals, expanding the use of guaranteed lifetime income products, and understanding when to take Social Security benefits are all steps that can be taken to advance a more equitable retirement system.

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About BlackRock:
BlackRock’s purpose is to help more and more people experience financial well-being. As a fiduciary to investors and a leading provider of financial technology, we help millions of people build savings that serve them throughout their lives by making investing easier and more affordable. For additional information on BlackRock, please visit www.blackrock.com/corporate

About the Bipartisan Policy Center:
The Bipartisan Policy Center is a mission-focused organization helping policymakers work across party lines to craft bipartisan solutions. By connecting Republicans and Democrats, delivering data and context, negotiating public policy, and creating space for bipartisan collaboration, BPC helps turn legislators’ best ideas into durable laws that improve lives. Since 2007, the Bipartisan Policy Center has helped shepherd countless bills across the finish line.