Target-Date Funds Attract Younger, Less Affluent Investors
07/16/2010 0 comments
Ruthe Ackerman on BankInvestmentConsultant reported that "Target-date funds are more likely to be used by younger retirement plan participants who have lower account balances and have been at their jobs for less time, according to a study released Thursday by the Employee Benefit Research Institute.
The trend towards younger target-date fund participants is due to the fact that new employees are more likely to be automatically enrolled in their employer’s 401(k) plan, where target-date funds are often the default option, the study said."
We believe that target-date funds are good default options for people who do not even want to touch their 401K accounts. However, not all target-date funds are created equal: one of the main problems is that target-date funds are usually funds of funds that tend to use funds in the firm. Some of those actively managed funds are underperformers or have high fees. That'll hurt participants in some sort of invisible ways.
Users can use MyPlanIQ's portfolio comparison tool to compare a portfolio against a target-date fund. We will further release a specific tool for such a purpose in the future. Another soon to be released features is to allow users to set a auto gliding path (i.e. gradually reduces risk as time goes) for their MyPlanIQ customized portfolios.
labels:401k,IRA,investments,
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