Seventy percent think their approach will help employees retire at their targeted retirement age, compared to only 43% of plan sponsors without this specific plan design.
Morningstar observes more flows into target-date funds (TDFs) using collective investment trusts (CITs) and those investing in index mutual funds.
Setting defaults too low, choosing the wrong default investment and offering company stock as an investment option could result in unintended consequences, BlackRock found.
Twenty-two percent do not know how their assets are invested, Legg Mason found in a survey.
Sixty-four percent of participants in their 20s own a TDF.
In 2017, target-date funds (TDFs) represent 41% of CIT assets in 401(k) plans, Cerulli Associates finds.
The right allocation could boost returns over a person's career by as much as 34%, the consulting firm says.
Most Millennials are appropriately invested, with 90% of their portfolios in equities.
Franklin Templeton creates additional active funds; Hartford Funds presents ETF focused on fixed income; First Trust introduces actively managed ETF; and more.
Bing Waldert, a managing director with Cerulli Associates, says, "converting the 401(k) plan to an income platform is a step in taking DB [defined benefit] market experience and applying it to the 401(k) market.”
In light of the market volatility, they fled from equities
A TDF may invest its assets into index-based securities that do not make tactical adjustments as the markets change—but the act of managing even an index-based portfolio according to a glide path that ramps down equity risk over time will always be at least in part fundamentally “active.”
Despite an ongoing plan sponsor investment unbundling trend, the majority of TDF providers continue to construct their TDF portfolios using proprietary funds as the underlying investments.
Employer contributions and loans are also prevalent, a Brightscope/ICI report says.