Tidbits

MorningstarAdvisor, a “free publication for independent-minded advisors who want to work smarter-for their clients and themselves,” is always guaranteed to include at least a few valuable tidbits for practitioners. The current issue is no exception.

For example:

It listed Morningstar’s Best 529 Plans:

-T. Rowe Price College Savings Plan & Maryland College Investment Plan (both managed by TRowe) – emphasizes actively managed funds.
-CollegeAdvantage 529 Savings Plan (Ohio) – Mixes a variety of brand name managers including Vanguard, PIMCO and Oppenheimer.
-The Vanguard 529 College Savings Plan (Nevada) – a 25bp expense ratio on the age-based options.
-College America –(Virginia) – The largest American Funds plan; includes the full American Fund lineup.

Provided some interesting statistics from a practitioner poll:

What is the biggest risk your clients face in retirement?

51.3% – Longevity

And only
17.8% – Investment performance
16.2% – inflation

Since the financial crisis how have you changed the use of annuities?

27.8% – Increased
4.6% – decreased
37.5% – no change
30.1% – Never use annuities

For your typical client’s retirement portfolio what percentage is in annuities?

<25% – 67.3%
24% – 50% – 25.7%
>50% – 6.9%

What is the biggest obstacle to using annuities?

46.5% – Costs
25.7% – Complexity
17.9% – Liquidity
5.9% – Risk of default
4.0% – Investment options

And finally, as always, a number of excellent articles. In this issue the real standout for me was a conversation Christine Benz (Morningstar’s outstanding director of personal finance) had with three of my favorite experts on the subject of retirement planning, Moshe Milevsky, John Ameriks and Thomas Idzorek titled “On the Lookout for Guaranteed Income Streams.” Introducing the discussion of annuities as “Controlling longevity risk is achievable, but clients have to decide what they’re willing to give up to get it,” these three gurus provide much food for though regarding the integration of annuities into a retirement portfolio.

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