Since the rapid rise in interest rates over the past few years, fixed income has come back into the spotlight. As the Federal Reserve begins cutting interest rates, retirement plan advisors might now be wondering how this shift will impact core bond and core plus bond portfolios.

To find out, we speak with Matt Brill, CFA, Head of North America Investment Grade Credit and Senior Portfolio Manager for Invesco Fixed Income. He’ll walk us through the basics of core bond and core plus bond portfolios, how the Fed’s intended “soft landing” will impact these sectors, and also highlight some of the fixed income opportunities that are most favorable for fixed income investors right now.

Key Insights

Due Diligence on Bond Funds: Fiduciaries should consider fees, performance against benchmarks, and the level of risk when assessing core and core plus bond funds. A balance between risk and stability is crucial to avoid bond portfolios behaving more like equities.

Impact of Fed Rate Cuts: The Federal Reserve's decision to cut interest rates is expected to benefit bond funds, making it easier to add bonds to portfolios and improve credit assets' performance, such as high yield and emerging markets.

Core vs. Core Plus Bonds: Core bond portfolios consist of highly liquid, lower-risk assets like treasuries, while core plus portfolios include higher-risk options, such as emerging markets and high-yield bonds, offering higher returns but also greater risk.

Not a Deposit | Not FDIC Insured | Not Guaranteed by the Bank | May Lose Value | Not Insured by any Federal Government Agency

Before investing, investors should carefully read the prospectus and carefully consider the investment objectives, risks, charges and expenses. For this and more complete information about the fund(s), investors should ask their financial professionals for a prospectus or visit invesco.com/fundprospectus

Past performance does not guarantee future results. An investment cannot be made into an index.

All data provided by Invesco unless otherwise noted.

Before investing, consider the Fund's investment objectives, risks, charges and expenses. Visit invesco.com/fundprospectus for  a prospectus/summary prospectus containing this information. Read it carefully before investing

The risks of investing in securities of foreign issuers, including emerging markets, can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.

Active trading results in added expenses and may result in a lower return and increased tax liability.

The risks of investing in securities of foreign issuers, including emerging markets, can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.

Junk bonds have greater risk of default or price changes due to changes in the issuer’s credit quality. Junk bond values fluctuate more than high quality bonds and can decline significantly over a short time.

As with any comparison, investors should be aware of the material differences between active and passive strategies. Unlike passive strategies, active strategies have the ability to react to market changes and the potential to outperform a stated benchmark. Other differences include, but are not limited to, expenses, management style and liquidity.  Investors should consult their financial professional before investing.

Invesco Distributors, Inc.

Considerable resources have been devoted to solving the challenge of portability in retirement savings over the past few years, and the stakes are high to get it right and cut down on costly an unnecessary retirement plan leakage.

In this episode, we talk with Ben Thomason, Head of Defined Contribution Distribution at Allianz Life Insurance Company of North America, to explore the importance of portability and the unique challenges it poses when it comes to in-plan guaranteed lifetime income solutions.

Thomason dives into the complexities of why portability matters for participants, preserving benefits, maintaining guarantees, and navigating the challenges of transferring retirement assets across plans and IRAs. He also talks about key factors advisors need to consider when assessing different in-plan guaranteed lifetime income options.

Key Insights:

Here are three concise key insights from the podcast episode:

• Technology's Role in Portability: Middleware technology is vital for maintaining seamless connectivity between record keepers and product providers, enabling easier portability of guaranteed lifetime income products and ensuring a consistent participant experience during transitions.
• Importance of Portability: Portability of retirement savings is crucial as workers frequently change jobs. In-plan guaranteed lifetime income solutions, such as annuities, need to ensure participants can transfer their benefits seamlessly without losing guarantees or facing disruptions.
• Product Design and Portability: Products designed as individual contracts offer significant advantages in portability over group contracts, as they maintain consistent benefits and guarantees when moved between plans, reducing administrative complexity and costs.

ERISA attorney Allie Itami, Partner at Lathrop GPM in Minneapolis, joins the 401(k) Specialist Pod(k)ast to talk about the status of the Department of Labor’s beleaguered fiduciary rule in light of recent stay rulings in Texas, and also chimes in on ERISA at 50 before addressing compliance challenges presented by annuities in 401(k) plans.

And click here to check out a recent blog post from Itami about ERISA’s 50th anniversary, which will be celebrated with a gala event in Washington D.C. on Sept. 12.

Itami is a partner in Lathrop GPM’s Business Transactions Group, specializing in employee benefits and is known for providing comprehensive counsel on fiduciary compliance under ERISA and the Internal Revenue Code.

Key Insights:

Annuity Challenges in 401(k) Plans: The inclusion of annuities in 401(k) plans remains challenging due to issues with fiduciary liability, stigmas associated with annuities (such as high fees and lockups), and a lack of comprehensive safe harbor protections under current regulations.

Fiduciary Rule Delays: The Department of Labor’s fiduciary rule, which was set to take effect in September 2023, has faced delays due to court rulings. Compliance on the original date is no longer a concern for service providers due to legal stays, and the likelihood of the rule being implemented soon is minimal.

ERISA’s Evolution: ERISA has adapted over its 50-year history, moving from employer-centered benefit plans like pensions to more individualized retirement options such as 401(k)s and IRAs, reflecting shifts in workplace benefits.

Morningstar Retirement President Brock Johnson joins a special 100th episode of the 401(k) Specialist Pod(k)ast to provide an inside look and share insights into the past, present and future of the comprehensive retirement planning solutions and investment research unit.

Johnson talks about how retirement solutions and research have evolved over the years, what’s behind a host of recent innovations, and provides a glimpse into the future.

Key Insights:

1. Morningstar Retirement’s Evolution and Mission: Morningstar Retirement has maintained a consistent mission since its inception, focused on empowering investor success by providing holistic advice and investment expertise, particularly in the retirement planning space. Over the years, they have expanded from offering a single product to a broad suite of services that now includes fiduciary services, custom target date offerings, and managed accounts.
2. Innovation and Future Focus: Morningstar Retirement emphasizes continuous innovation by listening to clients and expanding the definition of retirement solutions. They are focusing on offering more holistic and actionable retirement solutions, such as personalized annuity recommendations and advisor-managed accounts, to meet the evolving needs of the retirement planning industry.
3. Challenges and Industry Impact: One of the significant challenges highlighted is the lack of access to employer-sponsored retirement plans for many private sector employees. Morningstar Retirement is working to address this issue by making it easier for advisors and record keepers to manage smaller startup plans, aiming to improve access to retirement savings vehicles for a broader population.

Morningstar Investment Management LLC is a registered investment adviser and subsidiary of Morningstar, Inc. This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording; such opinions are subject to change without notice. The views and opinions of guests are not necessarily those of Morningstar and its affiliates. Morningstar Investment Management and its affiliates shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses or opinions or their use. Morningstar Investment Management does not guarantee the accuracy, or the completeness of the data presented herein. Firm data as of March 31, 2024. DC plan accessibility statistics available at https://press.aarp.org/2022-7-13-New-AARP-Research-Nearly-Half-Americans-Do-Not-Have-Access-to-Retirement-Plans-at-Work. Read more important disclosures here: https://www.morningstar.com/products/social-media-disclosures

The retirement landscape is undergoing a dramatic shift, characterized by unprecedented challenges such as increased longevity and unpredictable market conditions. Traditional retirement models centered solely on wealth accumulation are no longer sufficient. A more holistic approach is imperative to effectively manage risks, generate sustainable income, and ensure financial security throughout retirement.

To explain this transformation, joining us on the 401(k) Specialist Pod(k)ast are a pair of well-versed subject matter experts in Joshua Grass, CFA, Senior Strategic Accounts Associate at Allianz Life, and Todd Levy, Managing Director, RIA, with The Retirement Plan Company.

Josh and Todd share thoughts on how the landscape is changing, the new challenges emerging, how to adapt strategies that prioritize the creation of a sustainable income stream for retirees, and how to address participant concerns about retirement income planning.

Key Insights

Evolving Retirement Landscape:
Retirement planning is shifting from a primary focus on wealth accumulation to a more holistic approach emphasizing risk management and sustainable income due to increased longevity and demographic changes.

New Strategies for Retirement Income:
Industry experts highlight the importance of guaranteed lifetime income solutions, such as annuities, which provide stability and protection against market downturns, ensuring a reliable income stream throughout retirement.

Participant Concerns and Industry Response:
Many participants fear outliving their savings more than death itself. The industry is responding with services and products that offer personalized advice, inflation protection, and easy-to-understand income strategies, improving participants' financial confidence and retirement security.

Research cited in the podcast:

• Alliance for Lifetime Income, “Welcome to the Peak 65® Zone – A New Chapter in American’s Retirement Landscape,” January 2024
• Allianz Life conducted an online survey, the 2024 1Q Quarterly Market Perceptions Study, in February 2024 with a nationally representative sample of 1,005 individuals age 18+
• The Allianz 2024 Annual Retirement Study, conducted online in February and March 2024 with a nationally representative sample of 1,000 individuals age 25+ in the contiguous U.S. with an annual household income of $50k+ (single) / $75k+ (married/partnered) OR investable assets of $150k+
• U.S. Social Security Administration, Period Life Table, 2020, as used in the 2023 Trustees Report

Allianz Life Insurance Company of North America does not provide financial planning services.

Allianz Life Insurance Co

It’s quite rare for one person to manage a large-cap mutual fund for a consecutive span of 25 years, but that’s just what Kevin C. Holt, CFA, chief investment officer, U.S. Value Equities at Invesco, is celebrating this summer.

Holt and Devin Armstrong, who have been co-lead portfolio managers for the Invesco Comstock Fund since 2007, apply a unique contrarian approach and classic value investing techniques.

Holt joins the 401(k) Specialist Pod(k)ast to share more about the approach, what he looks for in a value stock, and why 401(k) participants need a well-diversified portfolio to reach their retirement saving goals.

Key Insights

• Invesco Comstock Fund:
  Kevin C. Holt has managed the Invesco Comstock Fund for 25 years, with a contrarian approach and classic value investing techniques.
• Contrarian Value Investing Strategy:
  Holt emphasizes a contrarian strategy that combines valuation metrics with behavioral psychology. He focuses on sectors where pessimism is high and valuations are low, like healthcare and consumer staples, adapting the strategy to changing market conditions.
• Importance of Diversification in 401(k) Plans:
  Holt advocates for well-diversified portfolios within 401(k) plans, stressing that diversification across growth and value stocks is crucial due to the unpredictable nature of market cycles and the historical performance during different inflationary periods.

Disclosures

Not a Deposit | Not FDIC Insured | Not Guaranteed by the Bank | May Lose Value | Not Insured by any Federal Government Agency

All data provided by Invesco unless otherwise noted.

The opinions expressed are those of the author as of July 22, 2024. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations.

Diversification does not guarantee a profit or eliminate the risk of loss.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

P/B (Price-to-Book): it compares the price of the stock with its book value (total assets minus total liabilities). It is commonly used for banks. P/S (Price-to-Sales): it compares the price of the stock with its sales (renevues) from the last twelve months. It is commonly used for companies that have losses. Price-to-earnings (P/E) ratio measures a company's share price relative to its earnings per share (EPS).

Enterprise value-to-sales (EV/Sales) is a financial ratio that compares a company's total value to its total sales revenue.

"The Art of the Answer" is an Invesco Global Consulting program and is for illustrative, informational and educational purposes only. We make no guarantee that participation in any programs or utilization of their content will result in increased business for any financial professional. 

RFP = Request for proposal

Click to view full disclosure statement.

No matter how easy plan sponsors try to make it for employees to participate in their company-sponsored 401(k) plan, too many workers still aren’t enrolling.

Our guests on today have some ideas on dealing with this problem—centered on how instead of making it easy to participate, making it even harder to avoid enrolling in the plan in the first place.

Marc Howell and Felix Okwaning, who are both Managing Directors—Enhanced Plan Design at Principal Financial Group, share some great ideas on how to use a combination of automatic features including “auto-sweep” to boost enrollment and deferral rates, dramatically helping employees get adequately prepared for retirement.

Despite offering unique tax advantages, lots of people remain unaware of health savings accounts (HSA)—and even many who are using them aren’t using them to anywhere near their full potential.

Jeremy Keil, CFP, CFA, a retirement-focused financial advisor and host of both the Retirement Revealed Podcast and Mr. Retirement YouTube channel, joins the 401(k) Specialist Pod(k)ast to discuss the most common mistakes he sees people with HSAs making, as well as how to help correct these mistakes with strategies that make the most of their exceptional capabilities.

Key Insights Include:

Common HSA Mistakes: Many employees mistakenly believe they can only use the health savings account provided by their employer, limiting their options. Another prevalent error is confusing HSA contribution limits with FSA limits, resulting in underfunding their HSAs. Additionally, many fail to invest their HSA funds for long-term growth, missing out on the substantial tax advantages and investment potential HSAs offer.

Maximizing HSA Benefits: To rectify these mistakes, employees should be aware they can transfer their health savings account funds to any provider offering better terms. Maximizing contributions up to the IRS limits ($4,150 for individuals and $8,300 for families in 2024) is crucial. Investing health savings account funds similarly to a traditional IRA can significantly enhance their retirement savings, capitalizing on the unmatched tax advantages of HSAs.

Strategic HSA Management: Advisors recommend finding the best health savings account provider, considering factors like interest rates and investment options. Real-world examples show substantial gains from switching to high-yield HSAs and avoiding unnecessary fees. Proper management, such as keeping receipts for future reimbursements, allows for strategic use of HSAs, ensuring funds grow tax-free and can be utilized efficiently in retirement.

SEE ALSO:

• Checking the Pulse of the HSA Market with Devenir’s Eric Remjeske

• HSA Contribution Limits Increased Slightly for 2025

The DOL’s new fiduciary rule is scheduled to become effective in September, and retirement plan advisors and plan sponsors have plenty to do to prepare for the changes it will bring.

Jerry Schlichter, founding and managing partner of Schlichter Bogard LLC and a well-known pioneer of retirement plan excessive fee litigation, visits the 401(k) Specialist Pod(k)ast to share some important insights on the upcoming changes, legal challenges and what advisors need to be doing to prepare for compliance.

SEE ALSO:

• Fred Reish Unpacks the DOL’s New Fiduciary Rule

• Nine Insurance Trade Groups Sue DOL Over Fiduciary Rule

Health Savings Accounts can be a very effective tool not only to pay for out-of-pocket medical expenses, but also to save for retirement thanks to a unique triple tax advantage.

To check in on the pulse of the HSA market, we talk with the co-founder and president of Devenir Research Eric Remjeske, who is also a co-author of the semi-annual Devenir HSA Marketplace Research Report, recognized as the industry standard for tracking health savings account market statistics and trends.

We’ll cover the key findings from the latest report while also talking about some market growth projections, thoughts on why more people aren’t using them as a savings tool, and 2025 HSA contribution limits.

SEE ALSO:

• Health Savings Account Asset Growth Booming