Brandes Investment Partners today released a new study by the Brandes Institute suggesting ways for investors to improve their financial prospects in retirement, including reducing the risk of outliving their assets (“money death”). The baby boom generation is now moving towards retirement age while longevity estimates suggest that their retirement may last much longer than expected. The study suggests that many of America’s baby boomers could increase their retirement assets at advanced ages by maintaining a larger portion of their portfolios in higher-potential investments such as equities (rather than re-allocating prematurely into fixed income) and managing the risk of money death by investing a modest portion of their portfolio in longevity insurance. The study comes on the heels of the U.S. Treasury’s plan to make it easier for defined contribution plans and IRAs to offer annuity options.
“Retirees in good health have a risk of outliving their assets regardless of their investment strategy. Our study suggests they may do better by aiming for superior long-term returns in their investment portfolios and dealing with money death risk separately,” said Barry Gillman, Research Director, Brandes Institute Advisory Board. “This contradicts the conventional wisdom, which tells people to play it safe when they retire by moving a large portion of their portfolio to bonds.
“One problem with the conventional approach is that about 60% of the money distributed from typical retirement accounts should come from investment returns earned after retirement. Today’s historically low yields are just not providing the returns retirees will likely need to sustain them.
“Until now, this approach has not been widely understood or used even by the healthy and wealthy individual investors who stand to benefit from it most. With the Treasury’s new initiative to tear down some of the barriers to investing retirement savings in annuities, this could also become a practical solution for many participants with 401(k) and IRA savings.”
The study cites evidence generated by the Brandes Retirement Simulator, a proprietary online model that projects a range of long-term asset outcomes based on an individual’s personal finances and expected lifespan, as well as portfolio allocations and investment assumptions, and the use of longevity insurance. The full study is available on the firm’s website at http://www.brandes.com/institute . Access to the Brandes Retirement Simulator will soon be available on the firm’s website at no cost to retirees and advisors who can customize the inputs and integrate it into their retirement planning.
Brandes Investment Partners is a global investment advisory firm based in San Diego and along with its affiliates, manages more than $32 billion of assets as of December 31, 2011, for institutional and private clients worldwide. Since its inception in 1974, Brandes has applied the value investing approach to security selection pioneered by Benjamin Graham. Among the first investment firms to bring a global perspective to value investing, Brandes manages a variety of investment strategies.
Brandes Investment Partners, L.P. is a U.S. registered investment adviser. Brandes does not sell or endorse any insurance policy. More information can be found at http://www.brandes.com
SAN DIEGO, CA, Feb 06, 2012 (MARKETWIRE via COMTEX) --