Our daily roundup of retirement news your clients may be thinking about.
Although target-date funds help diversify investment portfolios and rebalance over time toward the investors' retirement dates, clients are advised to reconsider investing in these funds, according to Forbes. A young investor can lose $454,000 over four decades by investing in a typical target-date fund with an expense ratio of 0.75%, based on a study by NerdWallet. — Forbes
Retirement savers cannot assume their investments will produce the returns they anticipated as near-zero short-term interest rates drag along and dwindling equity returns continue, according to Bloomberg. “Right now, things look pretty bleak for the next 10 years,” an expert says. “The U.S. has had a higher return for a balanced portfolio for the last 115 years than almost any other country in the world. We’ve had it really good for a long time.” — Bloomberg
Pre-retirees and retirees need to rebalance their investment portfolios more than younger investors do, writes Christine Benz, Morningstar's director of personal finance. While pre-retiree and retiree investors may have a high level of risk tolerance, their risk capacity has dropped over the years, meaning any losses are more likely to prod them to make adjustments to their retirement plan, writes Benz. "[W]hen a too-high equity allocation is combined with higher equity valuations and a shortened time horizon before spending, the results can be disastrous." — Morningstar
Retirement investors must be critical about the sales pitches given by agents regarding annuity products before believing in them, according to MarketWatch. Most of these pitches can be misleading and are contrary to common sense. For one thing, it is wrong to consider an upfront bonus to be "free money," and raising the income from annuity could mean a lower initial payout. Also, annuity carriers cannot offer yields higher than the 10-year Treasury rate, which is below 2%. — MarketWatch
More seniors are expected to have more free time than those who came before them, but not many of them are prepared on how they intend to spend this freedom, according to Money. Retirees who have limited financial resources can still enjoy their free time by engaging in activities that deepen ties with their families and loved ones. They should be advised to have a financial plan that ensures they will not run out of money because of their leisurely activities, experts say. — Money
