It's a debate that has dragged on for years and now BlackRock has issued a white paper in which it officially weighs in: "to" target-date funds are preferable to "through" TDFs, it says.
"It is BlackRock's position that a persuasive common-sense case can be made for the 'to fund' approach based on an understanding of human capital, or the ability to earn income, which is depleted at retirement, and retirement risk, which we argue is at its highest level the day retirement begins," wrote Ted Daverman, vice president, U.S. Retirement Group, and Matthew O'Hara, managing director, U.S. Retirement Group.
"To" funds, of course, are those with a managed roll down of equity only until the day of retirement, after which the asset allocation remains static, while the equity allocation of "through" funds continues to diminish beyond the target date.
Recommended For You
"Ultimately, we believe our research can shed light on three essential, interrelated questions that individuals, plan sponsors, and investment managers need to understand to meet individuals' retirement needs," they said.
Those questions are how much to save while in the workforce, how to invest savings, and how to spend savings in retirement.
"It is hard to find a rationale for taking more risk on the retirement date than at a later date when account balances are likely to be smaller and the planning horizon is shorter," they concluded.
"Similarly, it is difficult to understand on what basis a glide path should continue to reduce risk after human capital has been exhausted."
BlackRock decided to formalize its thinking on the debate, it said, "because anyone seeking sound retirement planning advice will quickly discover that the financial press is awash with various (and often contradictory) examples of advice, opinions, and rules-of-thumb."
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
