Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
October 7th, 2015
Editor’s Note
Today, PLANSPONSOR is pleased to bring you a special NewsDash sponsored by Morningstar Investment Management* group focused on ways to help optimize retirement income.
Income in Retirement
Employees and Retirement Income: Making the Connection
We all want to save enough money for retirement. But how do we get from here to there? Can you help employees have more income in retirement? We’ve done research on some of the steps people can take to help maximize their potential retirement income.Read more >
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Building Efficient Income Portfolios
Traditional portfolio optimization research has typically focused on total return strategies, which combine price and income returns. Here we offer a framework for building an asset allocation focused on income. These portfolios may appeal to investors who are in draw down mode with their savings.Read more >
Some financial professionals suggest individuals set up different ‘buckets’ for retirement income. Harold Evensky, chairman, Evensky & Katz/Foldes Financial in Coral Gables, Florida, says one “bucket” strategy is based on time or age: individuals would have a “bucket” of assets to use from age 65 to 75, another to use from age 75 to 85, and another for after age 85, for example. But, there are other ‘bucket’ strategies suggested by financial professionals. In fact, ask several different financial professionals what it means to set up ‘buckets’ for retirement income and likely there will be several different answers.Read more >
Special Offer
Special Offer from Morningstar Investment Management Group
Employees and Retirement Income: Making the Connection
Can you help employees have more income in retirement? Download PaperRead more >
Intelligent Financial Planning
Measuring Factors That Can Lead to More Retirement Income
Researchers from the Morningstar Investment Management group set out to quantify the additional expected retirement income achieved by an individual investor who makes more intelligent financial planning decisions.The Morningstar Investment Management group calls this measure ‘gamma,’ and the research examines five different gamma factors.Read more >
One current trend in defined benefit (DB) plans is liability-driven investing (LDI), in an attempt to match assets to future benefit obligations. Is there a way for defined contribution plans to make use of LDI—some kind of income security and some kind of asset maximization?Read more >
The legions of Baby Boomers approaching retirement is turning up the heat on the issue of ongoing income, especially to pay health care expenses in retirement, according to Cerulli Research. The July 2015 Cerulli Edge-Retirement Edition takes a look at how recordkeepers and plan sponsors can change plan participants’ perspectives, helping to de-emphasize investment return and think about potential income.Read more >
Conservative Investments
Low Bond Yields: The Effect on Portfolio Withdrawal Rates
Yields on government bonds are well below historical averages, a fact that has a significant effect on retirees, particularly those in early retirement years. The Morningstar Investment Management group examined what this means for the annual rates at which retirees can safely withdraw from their portfolios.Read more >
Asset managers and retirement plan advisers say they do not expect the Federal Reserve to raise the Federal Funds Rate from its current 25 basis points and that the uncertainty over when the Fed will raise rates will lead to continued volatility in both the fixed income and equities markets. However, if the Fed were to raise rates, it would benefit equities in the short term, while fixed income investments would decrease in value.Read more >
Withdrawal Strategies
Optimal Withdrawal Strategy for Retirement Income Portfolios
While a significant amount of research has been devoted to determining how much one can afford to withdraw from a retirement portfolio, surprisingly little work has been done on comparing the relative efficiency of different types of retirement withdrawal strategies. The Morningstar Investment Management group compares five popular withdrawal strategies and sheds some light on the optimal strategies for different types of investors.Read more >
For plan sponsors with a long view—one stretching beyond saving, down the lengthening span of retirement years—helping participants plan for decumulation seems increasingly important. Good options are available, both product-driven and not, and participants need good education to understand them. Plan sponsors wanting to add decumulation features need to study the different methods—seeking help from their adviser if they have one—implement those features best suited to their plan and workers, then supply educational materials that clarify what they do.Read more >
An academic analysis by Mark Warshawsky, of the Mercatus Center at George Mason University, examines two commonly proposed solutions for controlling outflows from defined contribution (DC) plans—the purchase of immediate lifetime income annuities and the well-known 4% rule. “While we know how to pay in to this new generation of retirement plans, we have not yet determined how best to structure the payouts,” Warshawsky writes. “Now that more workers with 401(k)s or individual retirement accounts (IRAs) are retiring, it’s time to address this question quickly and decisively to help retirees get orderly, lifelong payments.”Read more >
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*The Morningstar Investment Management group, a unit of Morningstar, Inc., includes Morningstar Associates, LLC, Ibbotson Associates, Inc., and Morningstar Investment Services, Inc., all registered investment advisers and wholly owned subsidiaries of Morningstar, Inc. The Morningstar name and logo are registered marks of Morningstar, Inc.

Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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