Investors and financial professionals have very similar ideas about what the ideal retirement portfolio includes — and it doesn't have a 60/40 allocation, nor does it include much crypto.
When asked in a recent survey how they would allocate $1 million saved for retirement, people put 20% into income-paying stocks or funds, 13.6% into annuities, 11.1% into certificates of deposit, 10.5% into bonds, 10.1% in other stock investments, 8.3% in alternatives, 4.3% in international stocks, 3.9% in IPOs or similar investments and 3.6% in cryptocurrency, according to a report Monday from Cannex and the Alliance for Lifetime Income.
People also said they would allocate 14.4% of the portfolio to real estate aside from their primary residence. That was a major difference from what financial professionals said they would recommend.
The professionals built a portfolio with 30.6% in dividend-paying U.S. securities, 20.7% bonds, 18% annuities, 14.4% other U.S. stock investments, 8.1% international securities, 3.8% alternatives, 2% real estate, 1.5% CDs, 0.4% crypto and 0.4% IPOs and similar investments.
“The allocations are pretty similar between financial professionals and investors,” said Tamiko Toland, director of retirement markets at Cannex.
It was curious that investors said they would allocate more than 14% of assets to real estate, but it's not clear whether they understood the question in the survey, Toland said.
It was reassuring that retirement portfolio allocations to crypto, both by investors and professionals, were relatively low, given how sensitive retirement assets can be to volatility, she noted.
The findings don’t show that people don’t benefit from financial advice — quite the opposite, Toland said. The true value of advice can be the ongoing monitoring and slight adjustments to accounts, not mention protecting people from themselves, she said.
“This is where the behavioral component is really important, and the biases that cause people to make unwanted decisions with their money,” she said. “Financial professionals can protect people from making bad decisions.”
That includes guidance on annuities that are already in a portfolio, such as deciding when to start taking payments, Toland noted. “There are a lot of decisions that can be made, and investors want to have that in the hands of somebody who knows what they’re doing.”
The survey was conducted in August and September and included responses from more than 2,000 investors ages 45 to 75 and more than 500 RIAs and various broker-dealers.
People were asked how they would build their own “ultimate retirement income portfolio” for age 65, with the assumption they would receive $3,000 per month in Social Security payments.
There was a disconnect between the percentage of people who said they liked the idea of annuities with guaranteed income components and the percentage of advisers who thought their clients were open to those products, the report noted. A prior survey from Cannex found a similar result.
About 80% of people said they were interested, and 81% of advisers said clients were interested in those annuities. But 49% of investors indicated they were extremely interested, while only 18% of advisers rated their clients’ level of enthusiasm that highly.
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