While the confluence of geopolitical turmoil, increased inflation, bearish financial markets, and increased regulatory scrutiny have fueled uncertainty, the M&A arbitrage opportunity set remains attractive.
While boomers are estimated to control over half of US financial assets—$29 trillion out of a $55 trillion total— more than 80 percent of that cohort may be unprepared for retirement, according to recent McKinsey surveys. Moreover, many prospective retirees feel that they lack assets and the financial knowledge they need for a confident retirement.
How and why the nation’s largest retirement system is imperiled.
According to Boston College researchers, millions of working-age households will be unable to maintain their pre-retirement standard of living in retirement. With lower returns from traditional portfolios expected over the next 10 years, diversification, rebalancing and staying the course will be key.
With solid long-term fundamentals and compelling valuations, high yield bonds remain one of the most resilient asset classes.
A decline early in retirement can have a big impact on the value of one’s nest egg. It means having to draw down a larger portion of one’s portfolio to meet income needs, while a decline that occurs later might be less hazardous to one’s wealth. Adding convertible bonds, high yield bonds, and dividend-paying equities may provide downside mitigation during major equity market downturns.
With more people living longer than ever, the challenge will be to not run out of money, as the need for monthly income grows. Rising health care expenditures add another dimension to longevity risk.