NEPC’s Bill Ryan was quoted in a recent Pensions & Investments article to discuss what he believes should be the primary defense against unexpected inflation for retirees. View the article on Pensions & Investments’ site here.
Defined contribution plan sponsors have shied away from putting inflation-sensitive investments in their plan menus, but with inflation still high, some are starting to re-evaluate their thinking.
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“The participants who probably would benefit the most are those over 60 in retirement who are taking withdrawals from their account and they’re trying to maintain their spending on gas and bread,” said Bill Ryan, a partner and head of defined contribution solutions at NEPC LLC in Chicago.
Retirees will need a “higher weight to inflation-sensitive assets because they’re trying to hedge against the unexpected change that would compromise their spending ability,” Mr. Ryan said.
Even then, though, Mr. Ryan and other consultants would be wary of adding new investments, preferring instead to allow target-date funds to do the heavy lifting in fighting inflation risk.
“I do think the primary defense against unexpected inflation or even unexpected equity rallies or shocks is through a target-date fund or some diversified portfolio because they help each of the asset classes play a certain role that counterbalance each other,” Mr. Ryan said.
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