When they do pull savings from TDFs, investors often make erratic allocations on their own. (Photo: Shutterstock)
Utilization of target-date funds, which are designed to get a functional investment strategy to 401(k) savers who may not know the first thing about investing, is being hurt by what savers don't know about TDFs.
"There are a lot of participant misconceptions around TDFs—59 percent say they don't know anything about them," said Rob Austin, vice president and head of research at Alight Solutions and author of new research showing many TDF investors are enlisting the "wrong behavior" with their set-it-and-forget-it investments.
Consider this: Half of TDF investors end up pulling money out of the funds after 10 years, yet the investments are designed to bring a saver either to or through retirement. Nearly a quarter pull their savings after 5 years in a fund, and 15 percent do after 3 years.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
