Target Date Funds Inspire Confidence

WORKPLACE RETIREMENT PLANS

Employees who participate in workplace retirement plans and use target-date funds are more confident about reaching their retirement goals and managing their portfolios, according to a study by ING. “Like many of the latest 401(k) features, target date funds …make saving for retirement easier and more automatic for the average plan investor. These funds are being designed into the newest breed of guaranteed income solutions,” said Rick Mason, president of Corporate Markets, ING U.S. Retirement.

Target date funds offer automatic asset allocation, over time, through a single age- and risk-appropriate investment. This simplified approach to investing is becoming increasingly popular among employers and employees. Target date assets have grown from $15 billion in 2002 to $363 billion in 2011, According to Morningstar and Financial Research Corporation.

Workplace investors have a strong preference for funds that are managed by multiple investment managers and provide a guaranteed income stream at retirement. Ninety-three percent of those who use target date funds say they would want a target date fund with stronger protection against market losses in the years leading up to and including retirement. Additionally, 80% prefer less market risk at that stage of the investment cycle.

“These findings suggest that diversified, age-adjusted target date funds may work better than traditional offerings in bridging the gap between investor knowledge and long-term retirement objectives,” said Paul Zemsky, Chief Investment Officer of Multi-Asset Strategies for ING Investment Management.

Other key findings of the study include the following:

• 88% of target date investors want a target date fund that offers guaranteed income at retirement.

• 61% of target date investors prefer multi-manager strategies and 14% prefer a single-manager.
To view a report, visit the ING Retirement Research Institute.

AMS Benefit Consultants has avocated these plans and all of our plans include them. Our expierence has been that employees contribute more to plans which they have confidence in performance with lower risk.