Dimensional Fund Advisors has launched the Dimensional TargetDate Retirement Income Funds, which were developed to help manageuncertainty around consumption in retirement.

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Read: Just offering target-date funds not enoughfor recordkeepers

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The series of 13 funds is designed to address market, interestrate, and inflation risks leading up to and throughout retirement.The funds use asset allocation strategies to invest inincome-growth investments (global equities and fixed income), as well asincome risk management investments.

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The portfolios aim to address market, interest rate, andinflation risks with a hedging strategy based on establishedliability-driven investing (LDI) theory and aninflation-protected fixed income portfolio.

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Allocations between income-growth investments and income riskmanagement investments shift over time to become more conservativeas individuals near retirement age, as well as through retirement,to manage relevant risks and support retirement consumption.

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“A good target date solution should balance the tradeoffsbetween growth investments and an appropriate risk-hedging asset,”David Booth, chairman and co-CEO, said in a statement.

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He added, “Our target date strategies are designed to managerelevant risks, in particular, interest rate and inflation risks,so investors are less exposed to the effects of random marketforces. This may reduce uncertainty about how much consumptiontheir investments will support in retirement, and enable plansponsors, consultants, and financial advisors to use meaningfulinformation about expected retirement consumption to help investorsplan for a more successful retirement.”

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While there’s been plenty of discussion in the industry aboutmanaging risk, there hasn’t been all that much about the risk tothe retiree of inflation. The general target-date fund plans forrisk in the type of investment, but not the risk to the retiree ofinflation eating away at savings.

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Earlier this year a patented target-date allocation model,christened Safe Landing Glide Path, took some of this into accountby transitioning its investors almost exclusively into cash andTreasury Inflation-Protected Securities (TIPS).

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