SEC seeks second round of glide path comments

The Securities and Exchange Commission is asking for comments again on target-date retirement fund glide path illustrations.

The rule amendment, which was first proposed in 2010, would require marketing materials for target-date retirement funds to include a table, chart or graph depicting the fund’s asset allocation over time – or its glide path.

The SEC found back in 2011 that investors are confused by target-date funds. Many have misconceptions about the point at which the asset allocation of their TDF stops changing.  Many believe the target date is the point at which the fund is at its most conservative allocation and that the allocation stops changing after that.

Other investors thought TDFs provided guaranteed lifetime income at retirement.

In 2013, the Commission’s Investor Advisory Committee recommended that the SEC develop a glide path illustration for target-date funds that is based on a standardized measure of fund risk as a replacement for, or supplement to, the proposed asset allocation glide path illustration.

There are two common glide paths for target-date funds. One is a “to” glide path, which gets investors to their target retirement date. The second is a “through” glide path, which continues to earn money for retirees during 20 or 30 years of their retirement. The goal is to get them through retirement, not just to retirement.

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