*Data source: Social Security Administration, “Income of the Aged Chartbook,” 2014, released April 2016. Retirement income source includes households with annual income of $72,129 or more, representing the top 20% of households by income. Wages are represented by the sum of income from wages and salaries and income from self-employment. Investments are represented by asset income, which includes interest, dividends, income from estates or trusts and net rental income or royalties.
This material is for informational purposes only, is not intended to be a recommendation or investment advice, and does not constitute a solicitation to buy or sell securities. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor's objectives and circumstances and in consultation with his or her advisors. All investments involve risk and there is no assurance that an investment will provide positive performance over any period of time.
Asset Class Related Risk
Different types of asset investments have different types of risks, which may provide higher returns but also greater volatility. In general, equity securities tend to be more volatile than fixed income or hybrid securities. The value of, and income generated by, debt securities will decrease or increase based on changes in market interest rates. As interest rates rise, bond prices fall. Government bonds are guaranteed as to the timely payment of principal and interest. However, there are other factors that can contribute to how securities react in various interest rate environments. Preferred securities combine the features of bonds and stocks, and have credit risk based on the issuer’s ability to make interest and dividend payments when due. The value of a REIT can be hurt by economic downturns or by changes in real estate values, rents, property taxes, interest rates, tax treatment, regulations or the legal structure of the REIT. Infrastructure-related securities may involve greater exposure to adverse economic, regulatory, political and legal changes. Commodities may be highly volatile. Except in certain circumstances, income is generally subject to both federal and state taxes. Income is only one component of performance and an investor should consider all of the risk factors for each asset class before investing.
Representative Asset Class Definitions
BROAD BOND MARKET: The Barclays U.S. Aggregate Bond Index represents securities that are SEC-registered, taxable and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis.
COMMODITIES: The Bloomberg Commodity Index is a broadly diversified index composed of commodities traded on U.S. exchanges, with the exception of aluminum, nickel and zinc, which trade on the London Metal Exchange (LME).
DIVIDEND-PAYING STOCKS: The S&P 500® Dividend Aristocrats Index measures the performance of large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years.
HIGH YIELD CORPORATE BONDS: The Barclays Corporate High Yield 2% Issuer Capped Index tracks the performance of U.S. non-investment-grade bonds and limits each issuer to 2% of the index.
HIGH YIELD MUNICIPAL BONDS: The Barclays High Yield Municipal Bond Index is an unmanaged index consisting of non-investment-grade, unrated or below Ba1 bonds. INTERMEDIATE TERM CORPORATE BONDS: The Barclays U.S. Government/Credit Intermediate Index is an unmanaged index that consists of dollar-denominated, investment-grade, publicly issued securities with a maturity between one and ten years that are issued by both corporate issuers and non-corporate issuers.
INTERMEDIATE TERM MUNICIPAL BONDS: The Barclays Municipal Intermediate Index is a subset of the Barclays Municipal Bond Index including maturities of five to ten years.
INVESTMENT GRADE CORPORATE BONDS: The Barclays U.S. Corporate Index is a broad based benchmark that measures the investment grade, fixed-rate, taxable, corporate bond market.
INVESTMENT GRADE MUNICIPAL BONDS: The Barclays Municipal Index covers the USD denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds and prefunded bonds.
MORNINGSTAR ALLOCATION–15% TO 30% EQUITY: Includes funds that seek to provide both income and capital appreciation by investing in multiple asset classes, including stocks, bonds and cash.
MORNINGSTAR TARGET-DATE RETIREMENT: Includes funds that provide a mix of stocks, bonds, and cash for those investors already in or entering retirement.
PREFERRED SECURITIES: The BofA Merrill Lynch Preferred Stock Fixed Rate Index is designed to replicate the total return of a diversified group of investment-grade preferred securities.
REAL ASSETS: The Real Asset Income Blend comprises a weighting of 28% S&P Global Infrastructure Index, 21% FTSE EPRA/NAREIT Developed Index, 18% Wells Fargo Hybrid & Preferred Securities REIT Index, 15% Barclays Global Capital Securities Index and 18% Barclays U.S. Corporate HY Index.
REAL ESTATE INVESTMENT TRUSTS (REITs): The FTSE NAREIT All Equity REITs Index is a free float-adjusted market capitalization weighted index that includes all tax qualified REITs listed in the NYSE, AMEX and NASDAQ National Market.
SENIOR LOANS: The Credit Suisse Leveraged Loan Index is designed to mirror the investable universe of the U.S. dollar-denominated leveraged loan market. Loans are added to the index if they qualify according to the following criteria: The highest Moody’s/S&P ratings are Ba1/BBB+, only funded term loans are included, and the tenor must be at least one year.
SHORT TERM CORPORATE BONDS: The Barclays U.S. Government/Credit 1-3 Year Index is an unmanaged index considered representative of performance of short-term U.S. corporate bonds and U.S. government bonds with maturities from one to three years.
SHORT TERM MUNICIPAL BONDS: The Barclays Municipal Short Index is a subset of the Barclays Capital Municipal Bond Index that measures the performance of investment-grade issues with maturities of one to five years.
U.S. EQUITIES: The S&P 500® Index measures the performance of large capitalization U.S. stocks. The S&P 500® is a market weighted index of 500 stocks that are traded on the NYSE, AMEX and NASDAQ.
U.S. TREASURY BONDS: The Barclays U.S. Treasury Index includes public obligations of the U.S. Treasury. Treasury bills are excluded by the maturity constraint but are part of a separate Short Treasury Index. In addition, certain special issues, such as state and local government series bonds (SLGs), as well as U.S. Treasury TIPS, are excluded. STRIPS are excluded from the index because their inclusion would result in double counting.