Executive Q&A: Refining Accumulation Strategies Through TDFs with MFS’ Jeri Savage

Jeri Savage: Yes, there could be a risk of overcomplicating plan menus in ways that distract from the primary driver of retirement success: steady, long-term accumulation. Despite industry interest rising in private assets, retirement income solutions, and even managed accounts, strong outcomes still come from consistent participation, appropriate deferral rates, diversification, and the discipline to remain invested through market volatility. Sponsor sentiment from our latest DC Plan Sponsor Survey reinforces this prioritization: 70% cite personalized advice as a key driver of better outcomes, far exceeding interest in retirement income solutions (22%) or private assets (6%). Implementation intentions also remain modest, with only 4% of sponsors likely to add private assets and 7% very or extremely likely to implement retirement income solutions in the next 12–24 months. Innovation can add value, but it should build on, not replace, sound savings behavior and prudent plan design.

Jeri Savage: Given our survey findings that more than 90% of plans offer target-date funds (TDFs) and 86% use them as the QDIA, due diligence should go well beyond confirming a series is on the menu. Sponsors and advisors should start with participant demographics and behavior. This includes who is in the plan, typical savings rates, and whether participants tend to remain in-plan at retirement or roll assets out, because those factors inform whether the glidepath is fit for purpose.

From there, evaluation should focus on whether the TDF’s approach to diversification and downside risk aligns with the outcomes the sponsor is trying to drive; in our latest plan sponsor survey, these are among the top risks sponsors cite. Fees matter, but the more important question is whether the series’ “to” or “through” retirement positioning, underlying portfolio construction, and risk management support long-term accumulation for the plan’s specific workforce.

Jeri Savage: Fee pressure has been a long-standing reality in defined contribution plans, and the most productive conversation is increasingly about value delivered for the fee rather than an “active versus passive” debate. Industry-wide, the fee dispersion between fully passive and fully active target-date approaches has narrowed, giving sponsors more flexibility to select a structure that aligns with plan needs and governance preferences. In our most recent DC Plan Sponsor survey, we find that 65% of plans offer active investments in their DC plans, and among those, 86% believe a mix of active and passive is appropriate.

Jeri Savage: Our Global Retirement Survey of participants highlights that participants understand many things about target date funds (such as they get more conservative over time and are a means of diversification) but potentially misunderstand other important components (such as what happens at retirement).

Participant understanding often hinges on clear communication about the TDF glidepath, how the portfolio’s risk level changes over time, and why the design is intended to support long-term outcomes, not short-term market calls. Sponsors can reduce confusion by explaining whether their series is designed “to” or “through” retirement, what level of equity exposure may still exist at retirement, and how diversification is managed as participants age.

By positioning the TDF as a professionally managed, age-appropriate allocation and reinforcing the benefit of staying the course, sponsors can help limit reactive trading, reduce decision paralysis, and keep participants aligned with an accumulation-focused strategy.

Jeri Savage: TDFs can evolve alongside in-plan retirement income innovation, but current sponsor behavior suggests their primary role will remain focused on long-term accumulation. Our research shows little participant interest in remaining in their TDFs post-retirement, and sponsor implementation remains limited: only 7% of sponsors report being very or extremely likely to add retirement income solutions in the near term, and many sponsors view existing conservative options as their de facto “income” offering. In addition, sponsors appear neutral on retaining retirees in-plan, which complicates designing a single, embedded income solution within a TDF structure. The more practical path is an “and” framework: continue to use TDFs as the primary accumulation vehicle while offering complementary distribution tools, such as systematic withdrawal guidance, managed payout options, or optional income components, designed to preserve liquidity and portability and to reflect that retirement income needs are highly individualized.

Jeri Savage: Target-date funds can help deter disruptive allocation changes during volatile markets by giving participants a professionally managed, age-appropriate portfolio that is designed to stay diversified and rebalance systematically. For defaulted or less-engaged participants, remaining in a TDF often reduces the temptation to trade based on headlines, which can otherwise lead to buying high and selling low. Even for engaged participants, the structure of a single diversified fund can provide reassurance that risk is being managed over time, typically resulting in fewer reactive shifts than among participants who build and monitor their own multi-fund portfolios. The practical message to participants is simple: a TDF is built for long horizons, and staying invested is critical to successful retirement outcomes.

Jeri Savage: Defaulted participants who remain in the plan’s QDIA are often using target-date funds (TDFs) as intended, so extensive “how TDFs work” education may be less critical for that group. The bigger opportunity is with participants who actively opt into TDFs, where implementation mistakes are more common, such as selecting the wrong target-date vintage, splitting assets across multiple vintages, or pairing a TDF with other core options in ways that dilute the glidepath and risk controls.

Retirement plan advisors can support sponsors by delivering clear, behavior-focused education that explains appropriate TDF selection, reinforces “one vintage per participant” as a rule of thumb, and clarifies when combining investments may increase unintended risk. Practical tools: one-page guides, enrollment prompts, and periodic refreshers for example can help reduce misallocation and keep participants aligned with a long-term accumulation strategy.

Jeri Savage: Across our participant and plan sponsor research, we measure overall retirement readiness by the answer to the question: How confident are you that you will be able to retire at the age you want to (or for sponsors, how confident are you in your participants’ ability to retire at the age they want to)? MFS’s Workplace Retirement Readiness Indicator reflects this broader view by incorporating sponsor confidence, plan engagement, advice access, and governance.

Within a target-date framework, “retirement readiness” should be defined as a participant’s ability to reach an appropriate retirement date with sufficient accumulated assets. The biggest gaps today are less about whether a glidepath exists and more about the lived financial reality of participants: only about one-third of sponsors are confident participants can retire when desired, while many participants cite competing financial priorities that limit saving. Bridging that gap requires pairing a prudent TDF/QDIA with stronger savings features, financial wellness support, and scalable advice.

Jeri Savage: Over the next 5 to10 years, I think the strongest target date franchises will differentiate themselves by demonstrating measurable improvements in participant outcomes, not by adding novel asset classes or features for their own sake. Plan sponsors and advisors will likely continue to demand disciplined portfolio construction, transparent risk management, and clear evidence that any enhancements improve retirement readiness net of fees and complexity.

At the same time, the industry increasingly recognizes that advice is central, particularly as participants approach and enter retirement with highly individualized income needs. Where consensus is still forming is how to deliver personalization at scale, ideally, the next evolution preserves the simplicity that makes TDFs effective, while better integrating advice to help participants translate accumulated savings into sustainable retirement income.

Jeri Savage: If I could change one thing about how sponsors and advisors approach TDFs today, it would be to view them less as a commodity and more as the plan’s foundational strategy for the typical participant. In most plans, the TDF is effectively the default investment solution, so the conversation should start with the role it is meant to play: helping participants stay diversified, manage downside risk over time, and remain invested through market volatility. That framing is consistent with our plan sponsor research and what sponsors say they are looking to address.

When sponsors position the TDF as the “set-it-and-stay-invested” option, supported by clear communication and access to guidance, it can simplify decision-making and better support long-term accumulation. A strong accumulation strategy is the foundation of retirement success.