Vanguard posted late last year that 51% of workers in the retirement plans they administer are invested in target-date funds. One of the reasons may be that 68% of the plans they manage have target-date funds as the default option. I was expecting an S&P 500 fund or even cash to be most popular. I guess target-date funds appeal to the "set it and forget it" majority that do not actively manage their money.Here is the article: https://retirementplans.vanguard.com/VGApp/pe/EducationNewsC...- zol
I hope before they "set it and forget it" the clients studied what they were investing in. Target-date funds vary widely in their investment strategy even though they may have the same target date. You still need to research them and pick one with a risk strategy you're comfortable with.
I believe the primary reason so many qualified retirement plans offer TDFs is because this meets the ERISA definition of a "Qualified Default Investment Alternative", which if offered, relieves the retirement plan fiduciary of fiduciary breech WHEN a 'stock-drop' occurs during market corrections and for auto-enrollment plan default investments, as well as an offering to meet investment diversification requirements when employer stock is offered as employer contributions to the plan.From ERISA's web site on this topic:"The final regulation provides for four types of QDIAs:o A product with a mix of investments that takes into account the individual’s age or retirement date (an example of such a product could be a life-cycle or targeted-retirement-date fund);"...http://www.dol.gov/ebsa/newsroom/fsQDIA.htmlAnd yes, TDFs can vary considerably, based on projected stock/bond mix by age and by the 'glide path' of the change of this mix at various future age points.BruceM
Target-date funds vary widely in their investment strategy even though they may have the same target date. You still need to research them and pick one with a risk strategy you're comfortable with. Unfortunately - in 401(k)s you probably don't have the ability to pick different funds, only the dates....Happy Anniversary BruceCM!(Target Funds)/dT
But at least target fund investing means the young are investing mostly in equities as they should and those close to retirement are being more conservative and holding more bonds.
Paul:Unless you're like me and relish the chance to continue making my investments GROW in my IRA while retired. I like to be able to "pick" some "lettuce" along the way and encourage more to grow!Vermonter
"...target-date funds appeal to the "set it and forget it" majority that do not actively manage their money."Kind of too bad. They could probably do MUCH better if they cared enough about their money to study up and learn a bit about how to invest, and how to reap rewards (dividends or growth or both), and how to shepherd their own IRA money.Vermonter
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