A Helpful Table for Researching Target Date Funds

TDF

What’s the difference between an objective and a hope? Target date fund brochures say the objectives of TDFs are to (1) replace pay and (2) manage longevity risk. You’d expect to see these objectives in prospectuses, but you don’t.

The following table makes it a simple click to open the prospectus of each target date fund, and it also provides the official objective that is stated in that prospectus. The DOL and ERISA attorneys encourage fiduciaries to research their TDF selection by reading the prospectuses, and by seeking TDF objectives that are in line with the objectives of the plan.

However, objectives found in marketing brochures are not the same as those found in prospectuses because the right course of action for achieving the stated goals is simply to save enough, which is not a very compelling call to action. If an investor has not saved enough, as is  usually the case, replacing pay and managing longevity risk are mere hopes. An objective without a reasonable likelihood of achievement is a hope, and “hope” is not a solid retirement plan. For more details, please see Current Practices.

Click to open ProspectusObjective
SMART Index – Hand B&TPreserve the purchasing power of accumulated assets and provide for growth: risk-controlled growth focused on delivering accumulated savings plus growth above inflation at the target date.
John Hancock Ret ChoiceHigh total return until the fund’s target retirement date, with a greater focus on income as the target date approaches
AllianzCapital growth and preservation consistent with its asset allocation
JP MorganHigh total return with a shift to current income and some capital appreciation over time as the Fund and some capital appreciation over time as the Fund approaches target date
PIMCOMaximize real return, consistent with preservation of real capital and prudent investment management.
Wells FargoSeeks to approximate, before fees and expenses, the total return of the Dow Jones Target Index.
USAACapital appreciation and current income consistent with its current investment allocation
TIAA-CREFHigh total return over time through a combination of capital appreciation and income
VanguardProvide capital appreciation and current income consistent with its asset allocation
VoyaTotal return, moving to a greater emphasis on current income and inflation protection
PrincipalTotal return consisting of long-term growth of capital and current income
American CenturyThe fund seeks current income. Capital appreciation is a secondary objective.
Fidelity IndexSeeks high total return until its target retirement date
T Rowe PriceSeeks the highest total return over time consistent with an emphasis on both capital growth & income
Alliance BernsteinThe Strategy seeks the highest total return over time consistent with its asset mix
Great West L1Capital appreciation and income consistent with its asset allocation
BlackrockProvide for retirement outcomes based on quantitatively measured risk
John Hancock Ret LivingHigh total return through its target retirement date, with a greater focus on income beyond that date
FidelitySeeks high total return until its target retirement date
Great West L2Capital appreciation and income consistent with its asset allocation
Great West L3Capital appreciation and income consistent with its asset allocation
Franklin TempletonLong-term total return consistent with its asset allocation.
State FarmBroadly diversified across global asset classes, with asset allocations becoming more conservative over time
American FundsSeeks to balance total return and stability over time

Ron Surz is president of Target Date Solutions www.TargetDateSolutions.com

John Sullivan
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With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.

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