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Four Strategies for Combating Low Annuity Yields


Morningstar Stocks Forum 2011

2011 Stocks Forum and Investor Workshops
October 13-14, Morningstar Global Headquarters, Chicago


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July 16, 2011 - Four Strategies for Combating Low Annuity Yields - by Morningstar Investment Research

To help avoid outliving their assets, more retirees should defer Social Security and consider income annuities. Yet many retirees do just the opposite, according to data presented in the report. Between 1997 and 2005, roughly 43% of Social Security-eligible individuals began taking benefits within one month of turning 62, even though waiting until their full retirement age would've translated into a substantially higher payout. Academics and finance professionals specializing in retirement income have conducted research into why investors are so resistant to annuities. Morningstar director of personal finance Christine Benz takes a closer look at the situation and discusses why annuities shouldn't be ruled out altogether.

What Does That Fund Really Cost?

I've noticed that Morningstar lists two expense ratios on the Expense tab for mutual funds, and sometimes these numbers vary. What's the difference, and to which number should I pay attention? How do I know if an expense ratio is high or low?

Christine Benz answers this question, stating when it comes to fund selection, it's worth paying attention to a fund's expenses because it's one of the easiest ways to stack the deck in your portfolio's favor. A fund's expense ratio provides an at-a-glance figure that helps you easily compare the costs of owning one fund with another. But there's more than one way of calculating an expense ratio, as the above question suggests, so it's important to understand what goes into the statistics.

Among the other topics we addressed this week:

Why China's Growth May Slow. Can China navigate around short-term obstacles to growth?

Fear Trumps Greed in June Fund Flows. Investors lose their taste for U.S. stocks and high-yield bonds.

Fidelity Star Manager to Take Short Leave. Fidelity Low-Priced Stock's Tillinghast plans fourth-quarter leave.

Crunch Time for the Euro. Now that the Italian elephant in the eurozone room is no longer being ignored, a partial Greek default is even more necessary to avoid a messy breakup.

Standout Short-Term Bond Funds in a Low-Yielding World. For yield-starved investors, these offerings are worthy considerations.

Is Groupon That Big of a Deal?. The firm's first-mover advantage may not be enough.

An ETF Primer for Retirees and Conservative Investors. Are you a retiree or a conservative investor considering ETFs? Here are the basics.

Untapped Growth Potential in Asian Health Care. Rising health-care spending in several Asian countries has much more room for growth, creating opportunities in the sector, says Matthews' Taizo Ishida.

Spotlight on CEFs: The Fund With the Largest Premium. PIMCO Global StocksPLUS & Income is a volatile CEF selling at a high premium.

Which Few New Equity Funds Have Raised Serious Money? And have they been good buys?

Volatility Only a Trader Could Love. Volatility in the credit markets will continue for the foreseeable future.

Magazines Battling with Apple for Customer Information. Magazine publishers are striving for a profitable digital subscription model.

First Trust Launches Cloud-Computing ETF. A VIX ETN liquidates. Plus, the week's best- and worst-performing ETFs.

The Error-Proof Portfolio: Give Asset Titling Due Care. Not doing so can have unintended consequences.

Janus Managers Struggle While Its Analysts Thrive. These analyst-run funds are beating the in-house competition.

Got Growth or Digging Value? Readers weigh in on why their investment strategies fall into the growth or value camp (or in between).

Employment Report Cause for Concern? After an awful jobs report, July has more bad news in store.

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