The Natixis ASG Retirement Spending Accounts have the ability to invest retirees’ assets with the goal of providing an annual income to fund short- and long-term expenses. The accounts start with a conservative asset allocation, then increase to riskier assets including equities and alternatives for a period of time, and eventually decrease risk as investors shift toward plan finalization.
An investor is most susceptible to sequence-of-return risks early in retirement, explains Edward Farrington, executive vice president of retirement at Natixis, in a discussion of the research that went into the product’s design. This is the period when the allocation of higher-risk assets is low to help limit volatility when initiating withdrawals. A major market correction at the beginning of retirement could deplete a large percentage of the retirees’ savings, he says. In pursuing potential returns and to help protect against risks, the allocation to risk assets rises during mid-retirement, then declines again late in retirement to preserve capital and prepare for transferring assets to a beneficiary.
Seeking to generate a steady cash flow, the accounts will use an Adaptive Retirement Income Glidepath and a risk management strategy. The cash flow will be calculated at either a 4% or 5% withdrawal rate, with an annual inflation adjustment, and the account will remain liquid to provide flexibility throughout the investors’ lifetime.
Retirement continues to be the top investment priority for individual investors, Farrington comments. “Our new Retirement Spending Accounts provide a contemporary approach to the age-old retirement challenge, how to match funding to current and future expenses, that considers market volatility, longevity risk, taxes and other potential financial challenges associated with retirement,” he says.
Alpha Simplex Group will determine the portfolios’ strategic and tactical asset allocation, while trading, withdrawal strategy and tax management will be led by Managed Portfolio Advisors, both Natixis affiliates. The portfolios will include mutual funds and exchange traded funds, and the accounts are designed for investors who started retirement in or around the years 2000, 2005, 2010 or 2015. The minimum investment is $100,000 and they will be sold through registered financial advisers. The Retirement Spending Accounts will be available in mid-May.
“Life changes dramatically for clients entering retirement, and their investment strategy should change with them. With so many variables, it makes sense to work closely with your investment and tax advisers. They can help identify the opportunities and create a plan to optimize your spendable income,” Farrington concludes.
More information on the Retirement Spending Accounts and “A New Chapter, A New Approach. Rewriting the Rules of Retirement Income,” a white paper on retirement income, are available at the Natixis website.