A Simpler Explanation of Target-Date Funds

July 31, 2013 ( – J.P. Morgan Asset Management has launched a communication program that offers a simplified explanation of its target-date funds.

By Kevin McGuinness | July 31, 2013
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Using easy-to-understand terminology, supported by animation and infographics, this explanation will cover J.P. Morgan’s SmartRetirement series of target-date funds. It will also be available to all SmartRetirement clients, regardless of the recordkeeper servicing their plan.

“Research has shown that while defined contribution plan participants want access to target-date funds for retirement savings, they do not understand some of the most basic components of how target-date funds work,” said Catherine Peterson, director of Retirement Insights at J.P. Morgan Asset Management. “Given the growing importance of target-date funds in plans, we developed this program to specifically address identified participant knowledge gaps.”

Peterson pointed to industry studies, which continue to show that many participants misunderstand key ideas such as what the date in the fund name actually means, the fact that the funds are already fully diversified and that target-date funds do not provide guaranteed income in retirement.

While many firms want to provide more information to participants, J.P. Morgan’s recent research found that 75% of participants don’t take the time to read all of the investment information currently provided to them. Also, 44% said they are already getting more information than they can absorb.