September 19, 2012 (PLANSPONSOR.com) – With defined contribution (DC) plans playing a growing role in the retirement savings process, one increasingly prevalent savings tool will be the target-date fund (TDF), according to BlackRock.
A survey from BlackRock found more than nine in 10 workers find the TDF concept appealing—and one-third find it very appealing. Younger workers, ages 25 to 34, are even more likely to find the concept very appealing (44%) than workers ages 55 to 59 (29%).
More than six in 10 workers say they would react positively if their employer automatically moved their retirement assets into a TDF, and about the same number of retirees indicate an identical reaction.
Many workers would be comfortable with an employer taking “automatic” support for savings even further: Nearly four in 10 say they would be willing to have an employer automatically increase annually the amount of retirement savings deducted from a paycheck. A similar percentage of retirees indicate they would have been comfortable with their employer taking this step during their working years.
According to Chip Castille, managing director and head of BlackRock’s US & Canada Defined Contribution Group, DC plan sponsors need to recognize that target-date funds have varying objectives and investment approaches that can affect investment performance as well as a fund’s suitability for a particular participant population. “Proper due diligence aligned with [a] good understanding of plan and participant realities can help a sponsor ensure that their target-date fund well supports their employees’ essential savings objectives,” he said. Boston Research Group conducted surveys of 1,035 retirees and 1,002 workers during March 2012 on behalf of BlackRock’s U.S. Defined Contribution business. Findings from the BlackRock survey can be found at http://www.BlackRock.com/RetirementSurvey.