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Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
Retirement income in the "New Normal."
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Retirement income in the "New Normal."

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Retirement Income Planning. Wealth Management. Retire, Curtis L. Lyman, Curtis Lyman, Curt Lyman, HighTower Advisors, HighTower, Financial Advisor, Income, Stocks, Bonds, Federal Reserve, Investment …

Retirement Income Planning. Wealth Management. Retire, Curtis L. Lyman, Curtis Lyman, Curt Lyman, HighTower Advisors, HighTower, Financial Advisor, Income, Stocks, Bonds, Federal Reserve, Investment Strategy,

Published in: Economy & Finance, Business
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  • 1. Prudent Ideas For The New Era Of Rising Interest Rates Retirement Income Your Logo
  • 2. After the 2008 financial crisis, interest rates stayed near all-time lows.
  • 3. The U.S. economy has strengthened in recent years, and we could be starting a long cycle of rising rates.-7 -5 -3 -1 1 3 5 7 9 1997-I 2000-I 2003-I 2006-I 2009-I 2012-I Q/Q%change(Annualized) Actual and Forecast U.S. GDP Growth Forecast Your Logo © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved © Advisor Products Inc., All rights reserved .
  • 4. Interest rates declined for three decades. 20121982 Federal Discount Rate Yearly Bond Returns © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved © Advisor Products Inc., All rights reserved
  • 5. A sustained period of steadily rising interest rates could mean lower bond prices for years. InterestRates BondPrices Bonds—a good investment for the previous generation of retirees—could decline in value throughout the retirement of the next generation of retirees. Your Logo © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved .
  • 6. For a retiree who needs stable income, what might higher rates mean? Your Logo © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved
  • 7. Should retirement-income investors own bonds? Should you sell bonds because we could be in for a long cycle of declining bond prices? © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved © Advisor Products Inc., All rights reserved
  • 8. “Those that fail to learn from history, are doomed to repeat it.” Winston Churchill © Advisor Products Inc., All rights reserved © Advisor Products Inc., All rights reserved
  • 9. Federal Discount Rate 19811948 Yearly Bond Returns In the last long-term rising rate cycle, from 1948 to 1981, bonds lost money in only five of the 34 calendar years. © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved © Advisor Products Inc., All rights reserved
  • 10. Your Logo U.S. Bonds 0% 5% 10% Standard Deviation Annualized Return 100% 3.8% 4.3%* *Standard deviation is a measure of volatility. In the 1948-1981 rising rate cycle, bonds averaged a 3.8% annual return. Bonds showed a positive return during a long period of steadily rising interest rates. © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved .
  • 11. 40% Balanced stock and bond portfolio, 1948-1981, showed an annualized return of 8.5%. 0% 5% 10% 15% Annualized Return Standard Deviation 10.5% 8.5%Large U.S. Stock Bonds Your Logo 60% 40% © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved
  • 12. Large U.S. Stock Small U.S. Stock Bonds Cash Annual Return Standard Deviation 0.0% 5.0% 10.0% Multi-Asset Portfolio, 1948 to 1981, annually averaged a return of 9.5%. • Different asset classes performed differently. • Asset allocation and diversification worked. • Modern Portfolio Theory worked. 40% 30% 20% 10% 9.5% 11.8% Your Logo
  • 13. (5) 0 5 10 15 20 25 30 35 1948 1982 Rising Interest Rates 2012 Federal Discount Rate Yearly Returns Declining Interest Rates © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved .
  • 14. 1982-2012 Annual Returns US Bonds: 8.82% US Stock: 11.14% US Cash: 4.72% Rising Rates 1948-1981 Annual Returns US Bonds: 3.83% US Stocks: 11.00% US Cash: 4.49% Declining Rates © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved .
  • 15.  Reassess holdings producing income.  Past performance may be nothing like future results. But that does not mean you should ignore history.  Bonds, in the 34-year period of rising rates from 1848 to 1981, provided positive returns.  Don’t try to call the market.  Avoid bets on a single asset class or security. At The Dawn Of A New Rising Interest Rate Cycle © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved .
  • 16. At The Dawn Of A New Rising Interest Rate Cycle Your Log  Shorten durations on bonds to reduce risk.  Bond laddering is a good way to control rate risk.  Short-term bonds let you ride a rising rate trend.  A written investment policy specifying asset allocations can help you manage downturns.  Align your risk tolerance with bond durations. © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved . © Advisor Products Inc., All rights reserved .
  • 17. AdvisoryFirm @advisoryfirm.com 888-274-5755 Your Logo See our periodic financial reports
  • 18. Disclosures Large-Company U.S Stocks represented by Standard & Poor’s 500; US Bonds by US Intermediate Government Bonds (SBBI) (1948-1975), and Barclay’s Capital Aggregate Bond Index (1976-2012); US Small Stock represented by Ibbotson Small Stock (SBBI) (1948-1978), and Russell 2000 Index (1979-2012). US Cash represented by three-month US Treasury Bills. Bonds and bond funds or ETFs depreciate in value as interest rates rise. Foreign investing involves political and currency risk and generally accepted accounting principles in many nations are not as well-established as in the U.S. Diversification may not protect against market risk. Past performance is never a guarantee of your future results. Gross domestic product (GDP) from U.S. Bureau of Economic Analysis. Actual GDP data presented through December 2012; forecasted GDP from The Wall Street Journal survey of economists, March 8-11, 2013. Acknowledgements Market data and analysis based on research from Dr. Craig Israelsen of 7Twelve Portfolio. Gross Domestic Product data from Fritz Meyer Economic Research. Your Logo © Advisor Products Inc., All rights reserved

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