The Markets March 23, 2009

Mutual Fund Strategies Still Rule in Retirement Income

Advisers continue to stick with the basics, using dividend-paying stocks or mutual funds and systematic withdrawals from mutual funds to fund their clients’ retirement income, according to Cerulli Associates.
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According to data from the firm, the percentage of advisers who always used those two methods in 2008 rose slightly to 49% and 47%, respectively. In 2007, the percentages were 46% and 45%, respectively.

Fewer advisers said they always use variable annuities (VAs) as retirement income products than in 2007. The percentage of advisers who used VAs with living benefits was 27% in 2008 compared with 38% in 2007. The percentage of advisers who used systematic withdrawals from VAs went from 33% in 2007 to 26% in 2008.

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Annuitization and packaged retirement income mutual funds also showed a slight drop. In 2008, 8% of advisers always used annuitization, down from 10% in 2007. Likewise, packaged mutual fund products went from 10% to 6%.

Individual fixed-income securities saw a notable increase, from 30% in 2007 to 38% in 2008.

Cerulli notes in its report that the mutual fund strategies advisers typically employ might be optimal in a bull market, but “the currently excessive market volatility has identified a need for an additional component of guaranteed income.’

Variable Annuities

For advisers who use variable annuities with their clients, living benefits are becoming a more important consideration. More than seven out of 10 advisers cite living benefits as essential in their analysis of VA provider (up from 62% in 2006), Cerulli found.

Overall, it is still only the fourth most important factor in the section of a VA provider, behind investment options, financial-strength rating, and pricing, according to Cerulli. “Guaranteed income options with liquidity features are gaining traction in the community of advisers who use VAs as an arrow in their retirement income quiver,’ Cerulli said.

The results are from the latest The Cerulli Edge—Retirement Edition. More information is available at www.cerulli.com.

Products March 23, 2009

The Hartford Expands Target-Date Series

The number of The Hartford Target Retirement Funds available in The Hartford Mutual Funds Family has expanded from three to nine.
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The target-fund series now includes nine target-date funds spaced five years apart between 2010 and 2050, according to a press release. Each fund invests in other funds in The Hartford Mutual Funds Family.

The Hartford Target Retirement Funds offer an investment glide path that annually adjusts each portfolio’s asset allocation to address an investor’s age and target retirement date, said Hugh Whelan, managing director for Hartford Investment Management Co., which manages the target-date funds, in the release. He added that a proprietary model adopted by The Hartford focuses on “’real life’ experiences, taking into account circumstances the typical investor in this age group would face, considering variable such as average contribution rates, the retirement target, the percentage of income needed to be replaced in retirement, the payment of Social Security retirement income benefits, taxes, and mortality.”

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In addition, The Hartford is publishing education materials to help participants understand target-date funds, determine if they are appropriate for their individual investment goals and risk tolerance, and ultimately select an appropriate fund. New educational materials, including an Easy Enrollment form, are now available to retirement plan sponsors and participants explaining the different target-date funds available through The Hartford’s retirement programs and allowing participants of retirement plans to select which fund makes the most sense for them, including proprietary and non-proprietary funds.

The Hartford Target Retirement Funds are available through The Hartford’s 401(k), 457, and 403(b) retirement programs. The Hartford’s Retirement Plans Group also offers two other suites of target-date funds through its 401(k), 457, and 403(b) retirement programs: Barclays Global Investors LifePath Portfolios and Alliance Bernstein Retirement Strategies.

More information is available at www.thehartford.com.

 

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