$4.8 Trillion and Growing: Why Traditional TDFs are Still Key to 401(k) Success

With assets surging and adoption near universal, target-date funds remain the QDIA of choice, even as industry leaders debate how to adapt them for a new generation of retirees

While American workers have become more knowledgeable and engaged in their financial decisions in recent decades, they also favor simplicity and are happy when a hands-off approach can produce significant financial gains and help guide them into retirement.

Such has been the successful blend offered by target-date funds, the predominant default for millions of participants in what has become the core of the modern defined contribution retirement plan system. TDFs have achieved prevailing status as the qualified default investment alternative (QDIA) in the DC space through a combination of their “set it and forget it” simplicity, as well as the ease of auto-enrollment and default investment features.

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The numbers alone demonstrate the TDF’s importance in the retirement marketplace. According to Morningstar’s 2026 Target Date Fund Landscape report, total TDF assets rose to $4.8 trillion in 2025, a jump of more than 20% year over year. Annualized over the last decade, assets are also up 11.9%. Just five firms control some 80% of those assets, with Vanguard alone holding 37% of the market, or $1.8 trillion, with nearly $36 billion in net new assets in 2025.

Jeri Savage, Lead Retirement Strategist at MFS Investment Management, says TDFs are firmly entrenched as the QDIA of choice, with survey data showing 86% of plans designating TDFs as their QDIA and 91% of plans offering TDFs. They also serve as the cornerstone for helping Americans make the commitment to saving for their own futures.

“TDFs are the predominant QDIA, but their implementation varies widely by vehicle, management style, and glidepath,” she explains. “Innovation continues, and there is more to explore in that area, but amid these variations, it is easy to lose sight of the DC plan’s core purpose: helping participants accumulate assets throughout their working lives so they can meet their retirement goals. Accumulation is not just one phase of the journey—it is the critical engine that powers long‑term success.”

A desire for innovation, and improvement in the retirement phase

Despite those enviable successes for both retirement savers and the industry itself, some restlessness exists as the appeal of alternative investments and other more complicated strategies has many plan sponsors wondering if standard TDFs could be re-tooled to provide more flexibility.

There’s also an acknowledgement that while the bond-heavy TDF glide path does an admirable job of pre-loading a participant’s retirement nest egg, the tool is less successful at helping participants once they do hit retirement. That has prompted calls for embedded solutions such as annuities to help retirees enjoy a stream of predictable income.

Industry experts such as Christine Benz, Director of Personal Finance and Retirement Planning for Morningstar, suggest that innovation and scalable solutions are already at the heart of the TDF’s widespread success for 401(k) participants. She says she believes that any distractive focus on flashy prospects such as alternative investments goes against the TDF’s simple and steady appeal.

“TDFs are the single-best innovation in my career of 33 years. They’re the easy button for 401(k) savers, and for the big, entrenched providers—Fidelity, Vanguard, BlackRock, Schwab. They’ve gotten better and they’ve gotten cheaper,” she says.

“So I personally don’t think that sizzle is needed in the 401(k) space. People need time-tested asset types. As a group, plan sponsors tend to be pretty circumspect—they do not want to stick their necks out in terms of adding new features that aren’t necessarily time-tested. Even if the DOL proposal is approved and we begin to see some adoption, I would still expect most plan sponsors moving pretty slowly.”

This year marks the 20^th anniversary of the Pension Protection Act of 2006, a landmark piece of legislation that significantly transformed the American retirement system. It established both QDIAs and the era of automatic enrollment, both of which have fed the TDF’s tremendous growth. As those two decades have passed, Benz says more and more workers are now looking to shift their TDF-driven accumulation successes into a new phase in their lives.

“Where they do need help is the realm of retirement decumulation,” she says. “We’re seeing more people stay in plan, post-retirement, which I think is actually a pretty healthy development—you have some guardrails around people in the form of a plan sponsor—a benevolent actor in this area, (versus) if people head out with their pool of retirement savings and try to hire some sort of financial advisor.

“We need more movement in terms of simplifying retirement decumulation for people who are in the spend-down phase,” she adds. “We’re seeing the early phases of that with the addition of some in-plan annuities. I think that’s a very healthy development.”

Accumulation is still the TDF’s core function

The TDF success story begins with the basic assertion that workers need to be savers throughout their careers. Retirement success still hinges on saving enough, early enough, as Savage says. In a landscape where target date funds are nearly universal, differentiation comes not from whether a plan offers a TDF, but from how intentionally that TDF supports accumulation. Accumulation is a critical and essential part of the participant journey.

“A strong accumulation strategy helps individuals build the savings they’ll need by focusing on consistency, discipline, and staying the course through changing markets. Plan sponsors should keep in mind that participants need to accumulate enough in the first place.”

MFS’ Jeri Savage

“At MFS, we believe that while retirement is personal, accumulation is essential,” Savage says. “A strong accumulation strategy helps individuals build the savings they’ll need by focusing on consistency, discipline, and staying the course through changing markets. Plan sponsors should keep in mind that participants need to accumulate enough in the first place.”

Sarah Holden, Senior Director, Retirement & Investor Research at Investment Company Institute, says she believes TDFs have reflected that industry-wide mission with a mixture of simple, outcome-oriented mechanics that still offer considerable fiduciary protection to plan sponsors.

“I would argue that the TDF is still a source of innovation,” Holden says. “The financial services firms who offer TDF bonds to the plan sponsors are part of an extremely competitive system. Plan sponsors want good investment options that are prudent for their people, at a reasonable cost.”

Recent ICI/Employee Benefit Research Institute data backs up MFS and Morningstar’s findings, with 89% of plans offering TDFs in 2023 – a 30% jump since 2007. Participation and holdings have also drastically increased, with 71% of participants holding TDFs—a nearly threefold increase since 2007—and TDFs comprising nearly 42% of the overall 401(k) market in 2023, up from just 8% in 2007. Despite being the default, Holden says that many participants say they have also independently chosen TDFs as their investment strategy, even with a myriad investment options provided during their onboarding process.

“It really is because the TDF combined diversification but then it added the innovation of automatic rebalancing—it gives you those two things together in the professional management of the portfolio,” she says. “I think that was appealing to plan sponsors. If you stick someone in the default investment at the beginning of their career and they actually stay with you, this will automatically de-risk them. It’s a powerful, successful savings tool that gets you to an age-appropriate asset allocation throughout your career.”

The “set it and forget it” appeal of the TDF does come with the unintended consequence that participants may not always understand how their TDF works. In MFS’ 2025 Global Retirement Survey, more than three-fourths of participants invested in TDFs said they believe that asset allocation is at its most conservative at the point of retirement. While that may be true for TDFs with “to” retirement glidepaths, this perception does not align with reality for TDFs that glide “through” retirement.

Holden says there is also a perception that TDFs have made investing so easy for participants that they may not have learned a lot of their own personal financial strategies along the way.

“But that’s not the case; we surveyed plan participants and three-quarters of them who looked at the educational materials provided said it really was useful,” she says. “They’ve absorbed some basic investing principles and understand the issues around riding out fluctuations in the stock market.”