Investors in Target-Date Funds Feel More Secure About Retirement

Workplace retirement plan investors who use target-date funds (TDFs) feel more secure about reaching their retirement goals and managing their portfolios than those who do not use them.
Reported by Tara Cantore

 

According to a study from ING U.S., 71% of target-date investors indicated that target-date funds made them feel more confident that they were making sound investment decisions.

When asked about various features available in target-date funds, all respondents showed a strong preference for those that are managed by multiple investment managers and are able to provide a guaranteed income stream at retirement. More than nine in 10 (93%) target-date investors and nearly three-quarters (71%) of investors who do not use them would want a target-date fund that provides stronger protection against market losses in the years leading up to and including retirement. Additionally, eight in 10 (80%) respondents using target-date funds and two-thirds (66%) of those not using them would prefer less market risk at that stage of the investment cycle.

“These findings suggest that diversified, age-adjusted target-date funds, when effectively designed, may work better than traditional offerings in bridging the gap between investor knowledge and long-term retirement objectives,” says Paul Zemsky, chief investment officer of multi-asset strategies for ING Investment Management.

Some other key findings of the study:

  • Eighty-eight percent of target-date investors have interest in a target-date fund that offers guaranteed income at retirement;
  • Eighty-six percent of target-date investors feel confident they know the definition of “diversification,” compared with a smaller number (71%) of those who do not use target-date funds; and
  • Sixty-one percent of target-date investors prefer multimanager strategies, while a much smaller number (14%) prefer a single manager.

The findings are from an online survey conducted by Synovate on September 19 and 20, 2011. The 540 respondents were active defined-contribution-plan participants (212 invested in target-date funds, while 328 did not) between ages 25 and 69, and were the primary or joint financial decisionmaker for their acocunt.