Hitting the mark with target date funds

Target date funds (TDFs) have transitioned to mainstream investment vehicles for top companies.

BrightScope's Top 30 401(k) Plans List recognizes the best plans with more than $1 billion in assets. This list represents almost 50,000 retirement plans, over 57 million workers and a total of around $4 trillion in assets.1

What’s common among the best-of-the-best? 
• Set-it-and-forget-it TDFs
• Generous matching contributions

As a matter of fact, TDFs represent more than 10% of the assets in the Top 30 List.1 

Participants are more confident with TDFs 

Acceptance of TDFs has steadily progressed as more participants come to understand their benefits, convenience and features. TDF users demonstrate more confidence they will reach their retirement goals and feel greater comfort with investment decision making.2 

 

 

TDF users report contributing more to their accounts than non-users ― a median of 2% more of income.2

 

 

Nearly two-thirds of users prefer TDFs with a “to retirement” asset allocation glide path over a “through retirement” glide path.2 “To retirement” glide paths are designed for investors looking to withdraw and spend most of the money around the retirement date, while investors looking to gradually withdraw funds after retirement would most likely benefit from “through retirement” glide paths. 

 

 

Most agree that automatic features (TDFs as a QDIA, auto-enrollment and auto-escalation) are helpful and will help them reach their goals.2  Out of those with a preference for TDFs, 61% want funds with a mix of active and passive investment strategies. Less than one in four prefer all active and fewer than one in seven prefer all passive.2 

 

 

Enhancing retirement outcomes with TDFs

By using TDFs, plan sponsors may be able to improve participation rates and potentially enhance retirement outcomes for participants. Examples of how to use TDFs to enhance retirement outcomes include:  
• Implement automatic enrollment into a TDF as the plan’s qualified default investment alternative (QDIA) 
• Increase use of targeted communications to, and engage with, specific employee cohorts to increase awareness of the benefits of TDFs

Work with your advisor, consultant and/or Voya Relationship Manager to learn if a target date fund is right for your plan.

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1 BrightScope’s Top 30 401(k) Plans List 
2 Voya Investment Management Fresh Insights: Participant Preferences in Target Date Funds January 2016