Bozeman, MT – WealthVest, a financial services marketing and wholesaling firm, announced today the publication of a new research paper focused on the successes and failures of 60/40 portfolio allocations since 1928. The paper, titled “Rethinking 60/40: How Multi-Year Guaranteed Annuities Can Help”, examines alternative options to help protect against 60/40 negative years.
Through in-depth analysis of monthly and annual returns on stock and bond data from the NYU Stern School of Business, co-authors Alex Strandell and Tim Pierotti, explore how purchasing a multi-year guaranteed annuity with a portion of a retirement portfolio can help insulate retirement savings from stock and bond market volatility. Strandell and Pierotti make the case for this approach by looking at how a hypothetical 60/40 portfolio with 20% of funds allocated to a MYGA would have performed when compared to a 60/40 allocation during the late 1960s, a period that mirrors today’s market conditions and Fed policy.

“MYGAs can play a critical role in delivering protection and guaranteed returns, regardless of what happens in the market,” said Strandell, a senior institutional marketing manager at WealthVest. “They can add a level of protection and guaranteed growth for investors looking to insulate their portfolio from stock and bond volatility.”

Drawing on historical context, Strandell and Pierotti’s research found that from 1969 to 1974 the hypothetical 60/40 portfolio returned 0.51% - one of the worst 5-year scenarios since 1928. During this time, the growth of an annuity would have brought up total account value, while also protecting the portfolio during negative years at the end of the 5-year term. According to the study, a 60/40 portfolio with 20% of funds allocated to a MYGA, with a 4.5% rate, would have gained 5.33% throughout the same 5-year period.

“The 60/40 portfolio mix is a long-used portfolio allocation because it provides market gains during market rallies and fixed income reliability during economic slowdowns, but it is most suitable during times when interest rates go down, as equities perform well,” said Pierotti, WealthVest’s Chief Investment Strategist. “When interest rates rise, as we are currently seeing, equity returns typically fall. This causes bond funds and bond values in the secondary market to fall, putting the entire 60/40 at risk for loss.”

While analyzing annual returns of a hypothetical 60/40 portfolio using the S&P 500® for the stock allocation, and Baa corporate bonds for the bond allocation, Strandell and Pierotti also found that in 2022, 60/40 portfolios faced one of their worst years since the 1930s, with a hypothetical 60/40 portfolio returning just 16.60%.

“A central theme of the study is understanding how MYGAs can help protect against sequence of return risk, which can have a larger impact on savings for individuals nearing retirement today,” Pierotti said. “Thanks to their principal protection and guaranteed interest rates, we firmly believe that annuities have a place in a modern portfolio, along with stocks and bonds.”
This sentiment is being reflected in the current demand for annuities by consumers, Strandell said. According to LIMRA, a life insurance trade association, annuity sales have increased to their highest level since 2008, reaching $80.7 billion in the third quarter of 2022, a 29% increase since quarter 3 2021. A rising interest rate environment in the United States has made MYGAs a highly competitive alternative to their competitor, certificates of deposit.

LIMRA reports that the average 3-year MYGA rate in September of 2022 was 3.50%, compared to 0.98% on an average 3-year CD.
WealthVest is focused on helping consumers and financial professionals navigate today’s volatile equity and fixed income environment with educational materials surrounding retirement income planning. The Rethinking 60/40: How Multi-Year Guaranteed Annuities Can Help white paper is available for download at http://www.wealthvest.com/rethinking-60-40-myga.

About WealthVest WealthVest is one of the leading distributors of fixed, fixed index, registered index-linked and variable annuities—as well as structured products— to U.S. financial advisors. WealthVest’s leadership is fueled by proprietary thought leadership, consumer-driven product design expertise, strategic marketing, technology, and specialization in both field and hybrid-based advisor wholesaling. Follow them on Facebook and LinkedIn or visit wealthvest.com.