Displaying items by tag: income

Prudential conducted a survey of 198 financial advisors to gain insight on how they are investing and constructing portfolios for retirees. 80% use separate portfolios that are specifically designed for retirees. Additionally, the use of targeted portfolios was higher among advisors who were more knowledgeable about planning for retirement. 

Another takeaway from the survey is that 50% of retirees prefer to live off of income from their portfolios. Thus, advisors need to ensure that their portfolios generate income for clients while balancing other factors like total return and diversification.

In terms of asset classes for retirement portfolios, advisors favored long-term fixed income, US large-cap stocks, and TIPS. Advisors who were more knowledgeable about retirement planning favored long-term bonds and TIPS to a greater degree than less knowledgeable advisors. 

The survey also showed that most advisors are constructing retirement portfolios themselves or with the assistance of third-party recommendations or allocators. Advisors with less knowledge about the subject were more likely to outsource portfolio construction. 

Most advisors are helping clients plan for retirement by optimizing for goals such as flexibility in spending or timeframe. This is in contrast to other approaches, which include using a bucket strategy or segmenting the portfolio into different strategies for different purposes.

Finsum: Prudential conducted a survey of financial advisors. Those with more knowledge about retirement planning favored long-term bonds and tend to use differentiated strategies.

One of the most important decisions that retirees will make is their Social Security claiming date. It’s only made once, and it will have long-term repercussions. Therefore, it’s crucial to make the best decision. 

There are single-premium, non-variable fixed or indexed annuities that are designed to offer retirees income at one level during the first benefit period and then at a different level during the second benefit period. 

This can help retirees push back their claiming date so that they can receive a higher level of benefits. The initially higher level of income can last up to 8 years. The median premium is $100,000, with an average of $155,000. 

These offerings have been popular with middle-income clients and even some wealthier clients, especially among workers in government jobs who can retire at earlier ages. Additionally, these products are also amenable to investors with less tolerance for risk who value steady income over asset appreciation. One obstacle to greater adoption of these types of annuities is that it’s challenging for advisors and agents to explain the benefits of pushing back the Social Security claiming date. 

Finsum: Annuities can help retirees by pushing back their Social Security claiming date. One annuity product is increasingly popular as it comes with a higher level of income in the upfront years to help bridge the gap.

Vanguard celebrated changes in its fixed income leadership during the closing of the stock market at the Nasdaq in New York, and it continues to be a leader in Active Bond ETFs.

 The recently launched Vanguard Core Bond ETF (VCRB) and Vanguard Core-Plus Bond ETF (VPLS), managed by experienced members of the Vanguard Fixed Income Group, have shown strong performance compared to their peers over the past decade. 

With growing demand for active fixed income ETFs, particularly evident in the success of Vanguard Ultra-Short Bond ETF (VUSB), investors are seeking strategies that can adapt to market changes, especially with anticipated rate cuts by the Federal Reserve in 2024. Both VCRB and VPLS offer potential solutions, boasting relatively low expense ratios and providing complementary options to Vanguard's existing fixed income lineup.

Finsum: Rate cuts are a key reason to consider moving your bond ETF exposure to a more active lens in 2024

For cautious-minded investors, active fixed income could be a much better option than cash. This is according to SPDR Exchange Traded Funds’ Managing Director and Head of Research, Matthew Bartolini, who notes that some of the major advantages of active fixed income are that it offers more flexibility, consistent performance, and can be more tax efficient. Overall, it can help portfolios generate income, dampen volatility, while still retaining exposure to upside opportunities. 

Many advisors and investors are already aware of these benefits as active fixed income has taken a large portion of flows relative to its size compared to passive fixed income and equity ETFs. As Bartolini notes, “Active fixed income has been really a consistent engine of support within the active [ETF] construct — not only from flows but also returns.” Another factor in active fixed income’s growth is that it allows investors to take advantage of elevated yields. 

Bartolini also believes that future returns will be appetizing for the asset class, although there will be some volatility to stomach. He also believes that cash is less desirable due to the reinvestment risk. His major focus is on constructing portfolios to generate income while properly balancing risk. 

Finsum: Active fixed income is seeing major growth in terms of inflows. Here’s why the asset class is well-positioned for the current moment given the combination of elevated yields and an uncertain macro environment.

In a CNBC interview, Blackrock COI Rick Rieder shared some thoughts on Blackrock’s newest active fixed income fund, and why he believes that active fixed income offers several advantages for investors. 

Active fixed income managers have the latitude to seek opportunities that are beyond what’s represented in the indices. As an example, he cites the Blackrock Flexible Income ETF (BINC) which has outperformed its peers since its inception in late May. Over this period, BINC is up 0.3%, while the iShares Core US Aggregate Bond ETF (AGG) is off by 4% and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is down 0.2%. 

BINC’s biggest allocation is to bonds outside of the US at 22% with US high yield debt and US investment grade debt accounting for 17% and 14%, respectively. According to Rieder, the stronger US dollar is leading to more attractive opportunities overseas. 

Passive funds are unable to take advantage of these opportunities. Another advantage for active fixed income is that certain pockets of risk can be avoided as well. He cites this combination as why active fixed income has outperformed, since it leads to more yield and reduced volatility.  

Finsum: Blackrock CIO Rick Rieder explained some of the structural advantages of active fixed income to identify opportunities and avoid pockets of weakness.