Displaying items by tag: retirement

The Trump administration put rules in place which forbid employers from considering social or environmental impact when it came to fund selection from enrolling in retirement plans. However, the Biden admin is turning a new leaf on this front as they have proposed a rule which will ease the decision-making process for employers if they want to add ESG funds to their employees’ retirement plans. This is yet another proposal from the Biden admin that favors renewables and green corporations in the country's transition to net zero emissions. Part of the response is a boost in demand as investors have overwhelming interest in ESG in their portfolios. It isn’t a no brainer that ESG should be a part of a retirement portfolio, as it does prepare for downside risk, but it may not outperform.

FINSUM: The U.S. 401(k) savings machine is a huge pool of investment, and institutional savings could be a major boost to ESG demand.

Annuities are often disregarded for mental reasons. Frankly, many investors can’t stomach shelling out a large sum of money for a benefit far down the line, and that all bears out in the data, as deferred income annuities make up only 0.7% of annuity sales in 2020. But longevity annuities should be a consideration for many Americans in their portfolio, particularly for those who worry their finances won’t last. The CDC says Americans are living over 6 years older than in 1950 and that's a lot of accumulated income needed to be made up for. Longevity annuities come with a variety of benefits that integrate with your tax and 401(k) schedule.

FINSUM: The mental barriers of annuities are high but modern solutions like refund options and beneficiaries exist that can ease the traditional concerns of annuities.

(New York)

Most advisors know and respect Wade Pfau, a retirement guru in our space. Well Wade has just offered a new take on annuities as part of a broader conversation on retirement income strategies. According to Pfau, “Annuities deserve an equal seat at the table with any other retirement income strategy … The whole idea that annuities mean giving up something is not true”. Pfau says that understanding a client’s retirement income preferences is key. For example, the total return approach is not for everyone, and the peace of mind of guaranteed income can be a big winner for certain clients.

FINSUM: Pfau’s one-size-does-not-fit-all view is a very apt one and it highlights how annuities could be the bedrock of a strategy for one client, and completely absent for another, with the majority being somewhere in between.

(New York)

Annuities have a long and complicated past that ultimately created a less-than-stellar reputation. However, over the last few years, the asset class has undergone a transformation of newer and better products, combined with better sales practices. Now, two big elements are creating a major tailwind for the product: growing demand from retirement plan inclusion, and aging demographics. According to TIAA, TIAA “nearly nine in 10 plan sponsors who do not offer in-plan guaranteed lifetime income annuities are at least somewhat interested in offering them” (from ThinkAdvisor).

FINSUM: Baby boomers are in peak retirement years and many don’t have as much saved as they would like, so annuities have a role. Further, Gen X is aging and likes annuities more than the Boomers, so they are presenting a very fertile market as well. Accordingly, many firms are seeking more annuities participation.

(New York)

Model portfolios are seeing great inflows recently, but their popularity has created its own problems. The biggest of those problems—a dizzying proliferation of funds. Today we are going to make an off-the-cuff recommendation. How about a one-stop, no fee “model portfolio” for retirement. The model portfolio? Buy these four ETFs: the Vanguard Total Stock Market ETF (VTI), the Vanguard Total International Stock ETF (VXUS), the iShares Core Total USD Bond Market ETF (IUSB), and the Schwab US REIT ETF (SCHH).

FINSUM: This is in jest of course, but this is a dead simple and well-conceived set of ETFs for retirement.