A Morningstar news release said the fee-based service is designed to generate retirement income over specified time horizons and risk levels and is offered exclusively through financial advisers.
Each retirement income portfolio is designed for investors in a different stage of retirement—short range, mid range, and long range—and aims to support annual cash flows of 4%, 5%, and 6% of the client’s initial assets, the release said.
Similar to the asset allocation in an endowment, the portfolios are diversified across various alternative asset classes, including global fixed income, high-yield bonds, commodities, and absolute return strategies.
Morningstar Investment Services uses Monte Carlo simulation to help derive portfolios that have high probability of supporting annual cash flows in line with the target payout rate over the respective time horizon, according to the release.
“According to the U.S. Census Bureau, nearly 8,000 Americans are turning 65 each day. Financial advisers play a critical role in helping these individuals prepare for the shift from the accumulation of assets to the distribution,’ said Bill Harding, director of research for Morningstar Investment Services, in the release. “Our suite of retirement income investment solutions addresses the specific needs of retirees. The Retirement Income Series delivers a comprehensive retirement strategy designed to generate a cash flow stream over an investor’s expected time horizon in retirement and protect against the risk of outliving assets.’
More information is available here.