seven essential habits

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  • 1.The 7 Essential Habits ofHighly Confident RetireesLESSONS LEARNED FROMBlackRocks 2012Retirement SurveyHow Your Retired ColleaguesGot the Most Out of Their 401(k)

2. Yes, You Can Builda Better RetirementBlackRocks 2012Retirement SurveyWhen it comes to building your retirement, youcant control the markets. But there is one thingyou can always control: your savings habits.And thats exactly what confident retirees didthroughout their careers. We listened and identified7 Essential Habits that you can put into practice tobuild retirement security.We asked over 1,000retirees if they wereconfident about theirretirement.The self-described ConfidentRetirees share the steps they tookthroughout their working careersthat helped build their confidence. 3. %Enroll EarlyTime is on your side.Yes it is. But only if youuse it. The longer yourtenure in your employersponsored plan, the morelikely you are to build upappropriate savings.What if its too late to start early?Then start now!ESSENTIAL HABIT # 177of confident retirees saidthey enrolled in a 401(k)plan early in their careers.Source: 2012 BlackRock Retirement SurveyStart Saving Today!WAITING COSTS MORE THAN SAVINGNote: This is for illustrative purposes only and not indicative of any investment. This illustration assumes your ability tocontinue to make contributions on a monthly basis. The starting amount is $0 and this illustration assumes you invest $300 permonth continually. Assumes a 7 percent annual return compounded monthly and no distributions. This illustration shows theamount if you start saving now, vs. your savings amount if you wait 5 years. "The cost of waiting" is meant to show the gapbetween those two number or what waiting 5 years could potentially cost. Assumes 7 percent annual return compounded monthlyand no distributions.Source: BlackRock Investing involves risk including possible loss of principal 4. %Max Your Savings RateRethink your contribution.Dont just stick withthe plans automaticdeferral rate. Evencontributing the maximummatch percentage maynot be enough.Confident retirees focused on themax! Whats the most the IRSallows you to contribute? Cantdo that today? Use automaticallyescalating contributions to getyou to that amount.73of confident retirees saidthey saved the maximumamount permitted in their401(k) plan.Source: 2012 BlackRock Retirement SurveyESSENTIAL HABIT #2MEETING THE MATCH IS JUST A STARTNote: This is for illustrative purposes only and not indicative of any investment. Assumes 7 percent annual rate ofreturn; employer match of 50 percent up to 8 percent; $50,000 income per year.Source: BlackRockExplore Your Savings Toolkit 5. %Increase SavingsWhenever You CanCircumstances change.We get raises, bonuses,finish paying off thehouse or the car.Whenever you have achance to increaseyour savings do it!The more you save now, the moreflexibility and choice youll have later.90of confident retirees saidthey increased theirsavings contributionwhenever they were able.Source: 2012 BlackRock Retirement SurveyESSENTIAL HABIT #3INCREASED SAVINGS vs. FLATLINING SAVINGSSource: BlackRock* For illustrative purposes only. This illustration assumes your ability to continue to make consistent contributions annually.Assumes a 7% annual return compounded annually and no distributions. Assumes a starting salary of $50,000 at age 25 with a2% annual pay increase. Ending balance expressed is at age 65.Age 25 Age 35 Age 45 Age 55 Age 65$0200,000400,000600,000800,0001,000,0001,200,0001,400,000Increased Savings Rate (.5% per year)Flat 3% ContributionConsider this illustration.Two 25 year-olds that make $50K per year contribute 3%annually. If one increases her savings rate by .5% each yearuntil she reached the maximum she would amass more than$1.2 million in savings! Thats $850K more than her colleaguewho stayed at 3%*.Make Your Savings Automatic 6. %Get Engaged!Review your statements.Talk to your employer find out whats theircurrent best thinkingabout helping youreach retirement.See what changes they have madefor new employees and whetherthey make sense for you. Its yourplan and your future!87of confident retirees saidthey made the most oftheir 401(k) plan.Source: 2012 BlackRock Retirement SurveyESSENTIAL HABIT #4Source: 2012 BlackRock Retirement SurveyTake One Action Each Week 7. %Actively Participate:Review Your Strategy Every Year!You dont take a trip tounknown territory withoutchecking the map. Askyourself Is this still thebest way to get whereI want to go?Look at everything your employerplan, outside retirement savings,your entire investment portfolio.Can you do more today tomake your future self secure?83of confident retirees saidthey reviewed their savingsstrategy on a regular basis.Source: 2012 BlackRock Retirement SurveyESSENTIAL HABIT #5Click The Questions for More 8. %Act Your Age!As a teenager youwanted a fast car.When you started afamily, you still wantedsomething nice, butyour drag racing dayswere over.Its the same with your portfolio.Earlier in your career, take on riskto maximize returns. As you getcloser to retirement, focus onkeeping what you have. Targetdate funds make that transitionfor your automatically.79of confident retirees said theychanged their investmentmix as they got older.Source: 2012 BlackRock Retirement SurveyESSENTIAL HABIT #6INVESTMENT STRATEGIES FOR ALL OF LIFES SEASONSNote: This is for illustrative purposes only and not indicative of any investment. Assumes your ability to change yourinvestment as you age. The target date at the end of the name designates an approximate year in which an investorplans to start withdrawing money. The blend of investments in each portfolio are usually determined by an assetallocation process that seeks to maximize assets based on an investors investment time horizon and tolerance for risk.Typically, the strategic asset mix in each portfolio systematically rebalances at varying intervals and becomes moreconservative (less equity exposure) overtime as investors move closer to the target date. The principal value of the fundsis not guaranteed at any time including the target date.Source: BlackRockGradually shift away from equities into moreconservative investments as you get older. Considertarget date funds, which do this for you automatically!Understand Target Date Funds 9. %Estimate Retirement IncomeWhat percentage ofyour final salary will bereplaced by your 401(k)savings, Social Securityand any other source ofretirement support?Experts say youllneed 70%.Dont wait until the day before youretire to estimate your income!Get a sense of where you are whenthere is still time to course correct!84of confident retirees said theyestimated their retirementincome before retiring.Source: 2012 BlackRock Retirement SurveyESSENTIAL HABIT #7SPEND IT THE WAY YOU SAVED IT.BE SMART ABOUT WITHDRAWAL RATES.Note: This is for illustrative purposes only and not indicative of any investment. See Appendix for full disclosure text.Source: BlackRock.Fund Your Golden Years 10. 4 Steps to Build a BetterRetirement FutureIts in your hands! Youcan take action today toincrease your savings in your employer plan aswell as on your own and create a betterretirement for tomorrow.Pay your future self first. Speak to your employerabout making your savings automatic.Get Started Today!Visit NOWHike Mt. Retirement for handy retirement savingschecklists designed to help you take action no matterwhere you are on your journey towards retirement.Let target date funds make retirement investing easier.Sign up for Just One Thing, a weekly retirementsavings tip delivered directly to your inbox.This material is provided as an educational tool and should not be considered investment advice. BlackRock cannot be held responsiblefor any direct or incidental loss resulting from applying any of the information provided in this publication or from any other sourcementioned. BlackRock is not engaged in rendering any legal, tax or accounting advice. Please consult with a qualified professional forthis type of advice.2013 BlackRock, Inc. All Rights Reserved. BLACKROCK, is a registered trademark of BlackRock, Inc. or its subsidiariesin the United States and elsewhere. All other trademarks are those of their respective owners.USR-1482 11. Estimate RetirementIncome (Disclosure)APPENDIXSources: BlackRock; Informa Investment Solutions. This graphic looks at the effect that the amount withdrawn from a portfoliohas on how long that portfolio may last. A prudent withdrawal rate (3% to 5%, adjusted and revisited annually) can increase theprobability of success. Other factors that may affect the longevity of assets include the investment mix, taxes, expenses relatedto investing and the number of years of retirement funding (life expectancy). This is a hypothetical illustration starting at thebeginning of a severe stock market downturn in 1973 to 1974. Beginning withdrawals in a rising market could improve thelongevity of your portfolio. The portfolio is made up of 50% stocks and 50% bonds. Stocks are represented by the S&P 500Index, which is an unmanaged group of securities and considered to be representative of the stock market in general. Bonds arerepresented by the Barclays Capital Government Bond Index, which is an unmanaged index comprised of all publicly issued,non-convertible debt of the US government, its agencies of quasi-federal corporations and corporate or foreign debt guaranteedby the US government. Inflation is represented by the Consumer Price Index. This illustration assumes a hypothetical initialportfolio balance of $1,000,000 as of December 31, 1972, and monthly withdrawals beginning in 1973. Each monthly withdrawalis adjusted annually for inflation. Each portfolio is rebalanced monthly. All dividends and interest are reinvested. Results will varybased on selection of other time frames and over time as assumptions change. These figures are for illustrative purposes onlyand do not represent any