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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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