The 2020s have been turbulent. Just as the COVID-19 pandemic was starting to recede, Russia’s invasion of Ukraine shocked the world. Inflation, dormant since the early 1980s, is now back in force, threatening the livelihoods of retirees living off annuities, pensions, and bonds. Despite recent upticks, interest rates remain chronically low, while geopolitical events are contributing to high volatility in equity markets. Fortunately, retirement investors are not powerless. An income-focused approach to investing can help address risks to retirement income even under challenging circumstances.
The income-focused approach has two distinguishing ingredients. The first is a moderate exposure to equities in retirement to help mitigate market risk. The second is an allocation to bonds designed to protect against the risks of rising inflation and falling interest rates.1 We show the real-world benefits of the approach by comparing the performance of Dimensional’s Target Date Retirement Income Funds (TDIF) to the average industry target date fund (TDF). We focus on the hypothetical experience of retirees since the beginning of 2020. The period includes two major disruptions: COVID-19 and the unfolding invasion of Ukraine.
Click here to view the full article including these three take-aways:
- Retirement investors face high and rising inflation, historically low interest rates, and stock market volatility.
- Dimensional’s Target Date Retirement Income Funds (TDIF) specifically address those risks through an income-focused approach.
- Recent performance shows that the approach works in challenging circumstances and can improve outcomes vs. conventional target date allocations.
With offices in Rutland and Williston, Vermont Copper Leaf Financial develops a customized wealth management plan designed to integrate every aspect of your financial life. Call us today at 802-878-2731 to schedule a strategy session and begin building your road map to financial success.
This material has been authored by Dimensional Funds and CLF makes no representation and takes no responsibility for the accuracy of the information presented.