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Portfolio > Asset Managers

Retirees Moving Less, in More Ways Than One

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If you’re a financial advisor with retired clients, you’re likely aware that retirees today are living longer, healthier lives than those in past generations. But did you know that retirees are spending a lot of time in front of the television or that most retirees are not relocating to lower-tax, warmer-weather states?

Those are just two of the surprising findings of a new study from robo-advisor United Income, called “The State of Retirees: How Longer Lives Have Changed Retirement.”

The report, based on data from multiple government and private data sources rather than a single online or phone survey, found that retirees on average spend about 4.5 hours, or 30% of their waking hours, watching TV including news shows on network and cable channels.

That can not only increase health problems but also make clients increasingly risk averse, says Matt Fellowes, CEO of United Income and co-author of the report. “Clients are getting too cautious,” which, in turn, makes it harder for advisors being able to “deliver meaningful wealth returns,” explained Fellowes, a former innovation officer at Morningstar.

He recommends that advisors work to counteract those fears, “getting active in the lives of their clients,” suggesting ways for clients to get more involved in their communities, in creating personal networks and in their hobbies. “A lot of older advisors are as much a life coach as a wealth manager. They should be aware of the increasing amount of time clients are spending each day in front of the TV, which is blasting increasingly sensational news,” Fellowes said.

Retirees also are more physically active, but the time they spend watching TV is three times as much as the time they spend on physical activities. For every 10 minutes added onto the life of a retiring 60-year-old, one minute is spent watching TV and just 20 seconds is spent on exercise, outdoor activities or sports, according to the study.

Staying Put As the health and wealth of retirees have increased, more are choosing to stay in or near their homes and neighborhoods rather than moving to a lower-tax state or cheaper, more rural areas within their states. “Retirees are increasingly staying put and living in more expensive suburbs near urban areas instead of less expensive rural areas,” the report finds.

Nearly half of retirees are now living in the suburbs of cities, and their numbers have increased by almost 40% over the past 40 years. The share of retirees who say they have moved in the past five years has fallen from a high of 23% in 1980 to a low of 15% in 2015, the most recent data available, and only 1% report moving out of state, according to the study.

“Retirees are more likely to move across town than to another state,” Fellowes said. They are not moving en masse to states with lower tax burdens or crime rates or better weather. How else to explain that three of the five states with the largest populations of retirees — California, New York and Pennsylvania — are among the states with the highest taxes, yet the share of Californians who are seniors has climbed to 11% currently from 7% in 1965? Low-tax Texas and Florida round out the five states with the largest senior populations.

“As retirees have become progressively healthier and wealthier they are increasingly choosing to live in more expensive, culturally vibrant, urban areas of the country and eschewing in growing numbers the lower cost, more remote rural areas,” according to the report.

Happy and Healthy The biggest changes for retirees have been their increased wealth, which has more than doubled between 1989 and 2016 to an average $752,000 in total wealth, and life expectancy, now 83 years for the average 60-year-old.

“The majority of retirees are much wealthier than previous generations,” said Fellowes. “But the next generation will face new challenges. Even bigger than the potential threat of government benefits being rolled back is that fact that we have not adjusted life cycle expectations. Most retire at age 62 — an age that’s fallen since the 1970s — even though they will live much longer.” Moreover, this mismatch between work, retirement age and life expectancy has been accelerating, says Fellowes. Plus, despite these gains in wealth, about half of all U.S. retirees remain highly dependent on their Social Security income, according to the report.

It concludes with a recommendation that today’s healthier and wealthier retirees become a resource for others. They could, for example, mentor and volunteer in schools, or pool together their $14 trillion in financial assets to back tax-advantaged bonds to help finance needed infrastructure projects. The report also suggests creating broader tax benefits for donors or their heirs to contribute to targeted domestic priorities such as education or infrastructure. —Bernice Napach

Passive TDF Misconceptions

The use of passive target date funds in defined contribution plans continues to grow, in part due to their low cost relative to other TDF options. “There’s been a significant interest in move of assets to so-called passive target date funds, or index target date funds,” according to Jake Gilliam, senior multi-asset class portfolio strategist at Charles Schwab & Co.

Gilliam spoke with to discuss why plan sponsors and advisors should look beyond just the low cost of passive TDFs and dig deeper in their due diligence. Gilliam recently co-authored a white paper for Schwab, “Passive Target Date Funds: Separating Myth from Reality,” which highlights three misconceptions about passive TDFs.

“Plan sponsors — as fiduciaries to their plan — are often very concerned with price,” Gilliam said. “We also want to encourage them to be as concerned with the fit of the target date fund, the underlying glide path, the design of the target date fund.”

Misconception No. 1: Passive TDFs are always a safer fiduciary choice. Prudent TDF selection is about process, not just pricing, according to the report. “As a plan fiduciary, you can’t just look at cost. There’s much more to the story,” Gilliam explained. “Cost is important. Cost is incredibly important, but it’s just one thing.”

Going passive and low cost may seem like “the easy choice,” but it does not absolve fiduciaries of their due diligence and ongoing monitoring responsibilities, according to the report. The report states that “low fees alone are unlikely to be in the best interests of the plan fiduciary if the overall TDF design is a poor fit.”

Rather, as the report continues, a fiduciary must consider all aspects of TDF design to ensure the option is well suited for the plan. For example, risk decisions around equity levels as well as allocations in more volatile sub-asset classes, such as emerging markets securities and high-yield bonds, should be conscious and deliberate.

According to the report, the slope of the glide path can lead to significant differences in risk and results over the multi-decade time horizon of TDFs. Over-relying on fees as the primary selection driver without these sorts of considerations fails to offer the same degree of protection, the report states.

Misconception No. 2: Passive TDFs are always a better choice for investors. Passive TDFs vary widely in risk/reward profile based on the many decisions that go into portfolio design, according to the report.

Not all passive TDFs are structured the same, with notable variances in key areas such as asset allocation, index selection and glide path that can all affect portfolio performance both in the short and long term. “There can be value in looking at different designs, looking at structures that will incorporate active and passive,” Gilliam explained.

For example, the report looks at how three passive TDFs in the marketplace offer very different glide paths based on the number of asset classes, the allocation mix of these assets, the exposure to alternative or traditional assets, and the size of risk-asset allocations at retirement. Each of the passive TDFs uses a different mix of asset classes, both in terms of the number of different categories included in the portfolio, as well as the sub-asset classes used in each segment. These types of active design decisions can translate directly into risk and return variances for investors, according to the report.

With this in mind, the report notes that a specific passive TDF can be an appropriate choice for a particular plan’s participants, but the evaluation process to reach this decision should include numerous inputs, of which cost is only one.

“The key message here is that it has to be the right fit for the plan … and the exposure that the participant’s getting needs to have been thoroughly vetted beyond just the cost component,” Gilliam said.

Misconception No. 3: Active or passive is an either-or choice. According to the report, implementation can be fully passive, fully active, or a blend of both — with pros and cons for all three approaches.

“All things being equal, lower fees will translate into higher returns. However, all things are not equal across TDFs, given the flexibility providers have in portfolio design,” the report states. It also points to the growing segment of blended active and passive TDFs, which can help bridge the best of both of these worlds.

The report looks at the pros and cons of each approach. Passive implementation can provide a plan with an effective, low-cost QDIA, but this approach might affect performance and force certain glide path decisions.

Meanwhile, an active implementation typically strives to add portfolio value for a higher fee, and these TDFs generally seek to adapt portfolios through time for return-seeking opportunities or for risk management by investing in underlying securities at different weights than the benchmark. In addition, this approach creates risk that the underlying strategy managers may make the wrong investment choices and underperform.

A blended implementation combines both passive and active approaches by investing in both low-cost index funds as well as active managers to gain select market exposures. Using both types of strategies can allow the TDF manager to refine active risk levels at different parts of the glide path and may also provide diversification as markets cycle. A blended approach has a generally modest fee increase over a pure passive implementation approach. —Emily Zulz

Annuities & The Single Girl

Single U.S. women may feel more positive about owning annuities than single U.S. men do, according to a new batch of survey data from LIMRA Secure Retirement Institute (formerly the Life Insurance and Market Research Association). The LIMRA institute analysts based this conclusion on a survey of 1,130 single, retired heads of households. All participants were ages 55 to 79, all had been retired for at least one year, and all had household incomes of at least $35,000.

Fewer than one-third of the participants had annuities. Participants who worked with financial professionals were about twice as likely to own annuities. The outlook of the female survey participants who reported owning annuities was much different from the outlook of the male participants who owned annuities.

The analysts found that owning an annuity had little effect on the men’s retirement confidence levels. About 68% of the men agreed with the statement, “I will be able to live the retirement lifestyle I want,” whether or not they owned an annuity.

When the LIMRA institute tried the statement “My savings and investments won’t run out if I live to be 90 years old” on the men, owing an annuity increased the likelihood that the men would say “yes” only modestly — to 74%, from 68%.

For the female survey participants, owning an annuity had a much bigger effect on those two confidence indicators. Owning an annuity increased women’s confidence in their ability to “live the lifestyle I want” to 71%, from 56%.

Annuity ownership also boosted women’s confidence in their ability to make their savings and investments last until they’re 90. Owning an annuity pushed the age-90 confidence indicator up to 67%, from 47%. —Allison Bell

Bernice Napach, senior writer for, can be reached at [email protected], Emily Zulz, staff writer for, can be reached at [email protected], and Allison Bell, insurance editor at, can be reached at [email protected].


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