closeup of hikers' ankles as they walk a path (Photo: Shutterstock)

Target-date funds, or TDFs, were initially created to work something like time-lapse photography. Let’s say you want to capture a tree’s growth to maturity. Individual snapshots are automatically taken at set intervals over a long period of time.  You forget about it until things come to full fruition, then lo and behold, you can play back the series of shots in rapid succession to see a sapling grow into an oak, as if 30 years were 30 seconds. Similarly, TDFs come with a promise to grow an investor’s assets over time by updating “snapshots” of stock-to-bond asset allocations without the investor having to do anything. As the investor grows older, TDFs automatically rebalance away from risky equities and towards safer fixed income assets. This culminates at retirement with a portfolio that is balanced to provide retirement income without taking too much risk.

Unfortunately, the realities of today’s market mean that we can no longer take for granted the oak’s undisturbed path to maturity. The ‘one and done’ concept of TDFs, the premise that a fund would keep growing as an investor moves toward retirement, passively continuing to contribute, is a threatened species. Let’s take a closer look.

Complete your profile to continue reading and get FREE access to BenefitsPRO.com, part of your ALM digital membership.

Your access to unlimited BenefitsPRO.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical BenefitsPRO.com information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
  • Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com

Already have an account?

 

BenefitsPRO

Join BenefitsPRO

Don’t miss crucial news and insights you need to navigate the shifting employee benefits industry. Join BenefitsPRO.com now!

  • Unlimited access to BenefitsPRO.com - your roadmap to thriving in a disrupted environment
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
  • Exclusive discounts on BenefitsPRO.com and ALM events.

Already have an account? Sign In Now
Join BenefitsPRO

Copyright © 2023 ALM Global, LLC. All Rights Reserved.