Eligible participants will be allowed to select one of the funds based on their year of expected retirement. The portfolio will automatically adjust to allocate more holdings towards equities and away from fixed-income products as the target year approaches. The point of this, according to a TIAA-CREF press release, is to allow individuals to accumulate wealth during retirement. To protect against inflation during retirement, TIAA-CREF will use inflation-linked bonds at or before the target rate.
The lifecycle funds are considered funds of funds, made up of existing TIAA-CREF mutual funds. The funds, named after the year to which they are targeted, will start with 2010, and will run in five-year increments, up until 2040. Investment choices such as these are becoming more and more popular with future retirees, as they offer low costs and a hands-off approach to investing (See Get a Life (Style) ).
Only participants at institutions that are converted to the company’s new platform will be offered the lifecycle funds. Currently, Purdue University is the first such institution slated for conversion, which will occur later this month.
The product is being offered by TIAA-CREF Individual & Institutional Services, a TIAA-CREF company. TIAA-CREF ( www.tiaa-cref.org ) is a national financial services company with $320 billion in combined assets under management.