American Century Investments has just released its 10th annual Retirement Savers Survey: Reflection, Risk and Resolve that reports as follows regarding risk preferences in target date funds:
Previous surveys of plan sponsors and their advisors echo these findings. A Met Life survey reports “seven in 10 plan sponsors are concerned about the impact of market volatility on those near or in retirement.” And a PIMCO survey reports that advisors want to protect those near retirement against losses of 10% or more.
But the target date funds chosen by plan sponsors do not protect near their target date. Sponsor actions belie their stated preference and the wishes of their beneficiaries.
Fiduciaries have selected risky TDFs that will lose more than 10% for those near retirement in about 3 years out of 10. But the last decade has produced only one such losing year—2022. The last 10 years have been incredibly lucky for target date fund beneficiaries nearing retirement. Do not expect more of the same.
Previous articles
I’ve written about this before. Here’s a recap of a few related articles:
Are These 401k Fiduciaries Hypocrites or Confused?
Tries to understand why fiduciaries say they want to protect, but don’t choose TDFs that actually protect.
Target Date Funds Do NOT Reduce Risk Through Time, Except a Few TDFs
Documents that most TDFs do not protect. They are in fact 90% risky at all ages, so they “hover” rather than “glide.”
Target Date Funds Do NOT Reduce Risk Through Time, Except a Few TDFs
TDF glidepaths are not what you think they are because they are not what fund companies say they are.
Conclusion
Everyone wants to be protected. Participants want to be protected against investment losses, especially as they approach retirement. Fiduciaries want to be protected against lawsuits. Both can and should be protected because the best fiduciary protection is beneficiary protection.
Ron Surz is CEO of Target Date Solutions (TDS), co-host of the Baby Boomer Investing Show (BBIS), and author of the book "Baby Boomer Investing in the Perilous Decade of the 2020s." TDS licenses target-date fund usage of Ron’s patented Safe Landing Glide Path® (SLGP) that actually protects beneficiaries as they approach retirement. Individual investors can follow the SLGP at Age Sage, an educational interactive website. The BBIS educates baby boomers on the risks and rewards in contemporary investing, and Ron’s book is a tour of these shows. He can be reached at Ron@TargetDateSolutions.com.
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