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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 > |
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| 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 > |
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| 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 > |
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| 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 > |
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| 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 > |
| Share the good news with a friend! Pass the Dash along – and tell your
friends/associates they can sign up for their own copy.Read more > |
| *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. |
