Target-Date Funds: A Temporary Solution to a Permanent Problem

Blanchett, David M.
September 2011
Journal of Financial Planning;Sep2011, Vol. 24 Issue 9, p60
Academic Journal
The widespread acceptance of target-date portfolios has improved participant investing. More participants are deciding to let investment professionals manage their accounts and will likely achieve higher returns and less risk as a result. Unfortunately, target-date portfolios. in particular target-date funds, are widely misused and are not properly understood by 401(k) plan participants. Because of this, target-date funds are likely only a temporary solution to the permanent problem of 401(k) plan participant self-direction. This paper will introduce an automatic managed account solution designed to be a permanent asset allocation solution for 401(k) plan participants. Initial evidence suggests professionally managed portfolios designed in a way to maximize participant use have advice-acceptance rates of more than 80 percent and dramatically improve the probability of 401(k) plan participants accumulating enough assets to fund retirement income.


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