Rethink Equities in Retirement
We believe the best way to help investors who are seeking to bridge the gap between income and longevity is to rethink the role of equities in retirement.
New retirees have a variety of adjustments to make, including moving into the distribution phase of investing. They can no longer look primarily for return, but have to give consideration to income and preservation.
The time-tested strategy of shifting toward dividend-paying equities for retirement investors — and not solely toward bonds and other fixed income securities — can help address longevity risk.*
Making a Retirement Income Portfolio Last Percentage of rolling periods when investment was not depleted after 30 years of distributions (1956-2015)
Companies that have consistently paid and grown dividends over time have been able to mitigate the tradeoff between market and longevity risk because they have tended to:
Dividend-Focused Funds: Striking a Careful Balance Between Volatility and Growth Average annualized returns over rolling 20-year periods from 12/31/70 to 12/31/15, reflecting an initial investment of $500,000 with monthly withdrawals of 5% the first year increasing 3% each year thereafter.
Instead of looking only for Value stocks, consider searching for dividend payers across multiple fund categories by using the following screens:
Screening for Dividend Payers
We’ve found that multi-asset dividend strategies have offered:
As part of a broadly diversified portfolio, these funds, which offer a blend of equities and fixed income securities, can produce a compelling risk-reward framework that can be an appealing option for investors in retirement.
For rolling 20-year periods beginning 7/31/87 through 12/31/15, reflecting monthly withdrawals of 5% the first year, increasing 3% each year therafter
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
This material is intended for use by financial professionals or in conjunction with the advice of a financial professional.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries.
Past results are not predictive of results in future periods.