Our daily roundup of retirement news your clients may be thinking about.
How value investing grows your retirement portfolio
Retirement investors are likely to grow their portfolio if they design an investing strategy that focuses on value stocks rather than on growth stocks, according to this article in MarketWatch. Several studies had shown that value stocks performed better than growth stocks. Clients can use common metrics for gauging a stock's valuation, such as price-to-earnings ratio, price-to-book ratio, and price-to-free cash flow ratio. Read more about measuring a stock's valuation. --MarketWatch
Testing a blended approach to retirement income
A distribution approach that combines income-focused and total return strategies performed better than a pure total-return approach in a simulation study that covered the dotcom meltdown, writes Christine Benz, director of personal finance of Morningstar. The hybrid approach, implemented with a model bucket portfolio, produced cash flow that was in sync with the planned distribution rate, and an outcome that was above the portfolio's starting value, Benz says. The ending value of the portfolio that used the hybrid approach was higher than that of the portfolio that used a pure total-return approach. --Morningstar
Calpers, nations biggest pension fund, to end hedge fund investments
The California Public Employees Retirement System has announced its decision to liquidate a total of $4 billion in hedge fund investments. The pension fund is the nation's largest, overseeing $300 billion in assets. Hedge funds are certainly a viable strategy for some, but at the end of the day, when judged against their complexity, cost and the lack of ability to scale at Calpers size, they don't "merit a continued role, says Ted Eliopoulos, the pension fund's interim chief investment officer. --The New York Times
How to add tax diversification to your retirement investments
Clients who save mostly through traditional 401(k) and IRAs for retirement can expect substantial required withdrawals that could bring them to a higher tax bracket, according to this article on U.S. News & World Report. To put their taxes under control when they are retired, retirement savers can add tax diversification and flexibility to their investments if they use Roth and other retirement accounts with various types of tax treatments. Read more about ways to gain control of taxes during the golden years.--Yahoo Finance
Should you worry about Social Security being cut?
Although Social Security faces financial problems, Steve Vernon of the Stanford Center on Longevity writes that he intends to push his retirement plan, i.e. to defer his benefits until he turns 70. There is no reason to panic because Congress is very likely to implement major changes similar to what lawmakers did in 1983, when the retirement program nearly drained its Trust Fund, Vernon says. Congress is likely to approve small benefit reductions and tax increases to replenish the system.--CBS Moneywatch
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