Figuring out how much you need to save for retirement is a moving target. Save too little, you run out of money in old age. Save too much, you end up with a fancy funeral and wealthy heirs. BlackRock, the world's largest asset manager, created a series of indexes to track how much it would cost for investors to generate income in retirement. "If you don't know the fair value today of your anticipated retirement needs, it's kind of like buying a house and not knowing what the mortgage is," said Chip Castille, BlackRock's chief retirement strategist. A Federal Reserve rate hike in December and a Donald Trump stock market rally have made it easier for investors to meet their retirement needs, according to BlackRock's cost of retirement income, or CoRI, indexes. (See chart below.)

The cost of retirement income and interest rates move in opposite directions. As rates rise, the cost of retirement income falls, like the relationship between bond prices and yields. Fed officials expect to raise interest rates three times this year, which could further lower the cost of retirement income. The CoRI index value shows how much it would cost to buy $1 of retirement income. For example, the index for investors retiring in 2025 currently indicates that it costs $16.10 today for $1 of income eight years for now. So if you're an investor who wants $100,000 in annual retirement income in 2025, you would need a $1.61 million nest egg, or $16.10 multiplied by $100,000. That would be enough for that investor to buy a fixed annuity to generate $100,000 in lifetime annual income. "The CoRI indexes takes into account how retirement income can fluctuate because of interest rates and inflation," said Wade Pfau, a professor of retirement income at the American College of Financial Services who has his own retirement savings benchmarks.

The 4 percent rule

Most investors ditch precise measures of what they need for retirement in favor of simple rules of thumb, such as the 4 percent rule. Under the rule, you withdraw 4 percent per year from a diversified portfolio of stocks and bonds, adjust annually for inflation, and you will have enough to last for 30 years in retirement based on historical returns of the U.S. stock market. The problem is that the 4 percent rule was developed in the 1990s when interest rates were significantly higher than they are today. "The success of the 4 percent rule may be a historical anomaly," Pfau said. He also found in his research that portfolio losses in the early years of retirement would make use of the rule unsafe for many retirees.

The magic number