As Target Date Strategies continue to evolve as an offer inside of Defined Contribution (DC) plans, understanding the objectives of plan sponsors and participants is more important than ever.
From a participant perspective, the focus is on balancing between growing assets for retirement and minimizing risk. Similarly, plan sponsors fall into two camps, says Michael Doshier, Senior Defined Contribution Advisor Strategist for T. Rowe Price. “One camp is more focused on a long-term retirement income stream, while the other is more concerned with the here and now and market volatility. And, of course, costs are always top of mind.”
Addressing the range of needs requires Target Date solutions to be rooted in reality. “Relying on a default asset allocation for the ‘average’ person ignores the full participant population in favor of building a glide path designed to serve a mathematical value, not a real person,” explains Kathryn Farrell, Portfolio Specialist in T. Rowe Price’s Multi-Asset Division. “Instead, in our modeling, we use a range of inputs for each variable to more accurately reflect the nuances of diversity within and across plans.”
Listen to learn more about identifying objectives, evaluating risk, and how TDF glide paths can adapt to match diverse needs.