Retirement Update

Retirement Update – August 2018

Industry Updates

Key Takeaways:

  • Equity markets, as opposed to interest rates, saw the more significant movement in July. There were positive equity returns across the month led by the U.S. Overall, global growth improved but there are widening regional divergences with the U.S. again leading the way while emerging markets look to be slowing.
  • Discount rates on corporate bonds were relatively flat, falling slightly by 4 basis points.

July 2018 Summary

The FTSE (formerly Citi) Pension Liability Index remains close to 2 year highs. For most plans this means liabilities will have fallen relative to assets and funding will have improved over recent periods. While the market expects the Fed to raise short term interest rates further several times, this expectation is already priced in to the long term interest rates that impact pension liability valuations. Recently, markets have been moving more in response to the risks of an escalating ‘trade war’.

Discount Rates & Asset Returns

Discount rates decreased slightly last month (0.04%). However, rates are higher than rates at this time last year and up nearly 0.50% since the end of 2017.

Global equity markets saw positive returns in July led by the U.S. Overall, global growth improved but there are widening regional differences. The dollar appreciated and somewhat dampened foreign returns. The broad bond market was little changed. High yield and emerging market debt increased as credits spreads narrowed.

What’s New at R&M?

River and Mercantile adds Director and Consulting Actuary to New York Office

R&M announced in July the appointment of Joe Anzalone as Director and Consulting Actuary to add another member to their recently opened New York Office. Joe comes to R&M after 11 years at Mercer where he consulted on areas such as plan terminations, lump sum windows, mergers and spinoffs, liability-driven investing, and nondiscrimination testing.

Ask R&M!

Q: We would like to complete a retiree annuity purchase before the end of the plan year. Is there enough time to do this before the end of 2018?

A: Yes, but you need to start soon. From start to end this process typically takes around 2 months at a minimum. The second half of the year, particularly Q4, is a busy time in the annuity purchase market because plans often want to close transactions within the calendar year. Transacting in 2019 is usually not a problem, but plans may have to pay the PBGC premiums they would have saved by virtue of the annuitization for an extra year in this case.

We regularly advise plans throughout the annuity placement process and are usually able to work with plans and the insurance companies to meet the desired timelines. Part of this process considers how busy the insurers are and whether there is any justification to deferring purchase to the next year in order to potentially attract more bidding insurance companies.

Have a question for R&M? Please submit it to and look for a possible answer in next month’s update!


SECURITY INDICES: This presentation includes data related to the performance of various securities indices.  The performance of securities indices is not subject to fees and expenses associated.  Investments cannot be made directly in the indices.   The information provided herein has been obtained from sources which River and Mercantile LLC believes to be reasonably reliable but cannot guarantee its accuracy or completeness.

CONFIDENTIAL:  For addressee use only, not to be disclosed to any other person without express consent from River and Mercantile LLC.  Past performance cannot be relied upon to predict future results.  River and Mercantile LLC is an investment advisor registered with the US Securities and Exchange Commission.

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