Target-date funds (TDFs) have the potential to improve retirement incomes for DC plan members. But how do you decide on a TDF strategy?
A survey by SEI finds that American DC plan sponsors are evaluating their current target-date funds (TDFs) and considering whether or not custom TDFs are a better option.
Age to retirement isn't a good measure of risk tolerance.
MFS Investment Management Canada Ltd. has announced changes to its Canadian LifePlan Funds to address home-country investment bias.
More American DC plan members are investing in target-date funds over time.
In a period when equities performed better than other asset classes, American DC retirement plan members cut their holdings in domestic equities and increased their investments in fixed income assets in 2012.
Canadian pension plan sponsors are increasingly focused on finding new ways to mitigate the employer risk inherent in DB plans, while also being mindful that many Canadians are not comfortable assuming the level of risk and responsibility that DC plans call for. Target benefit plans (TBPs)—which fix contributions and retirement benefits according to a predetermined formula but allow benefits to be adjusted up or down as future conditions affect plan funding—are emerging as a potential fix to this challenge.
Target date products (funds or automated portfolios) automatically reduce the exposure to equity and other risky assets of a DC member’s invested savings as he/she approaches retirement. But is this reduction in risk good for everyone?
With more than 80% of Canadian plan sponsors currently offering a DC option in their employer-sponsored pension plans, the shift to DC is firmly entrenched. In the U.S., nearly 60% of all pension assets flow into DC plans, according to the 2012 Towers Watson Global Pension Assets Study.
Target-date funds or life-cycle portfolios now represent the most frequently used default investment option for new Canadian DC arrangements. And they are quickly replacing passé default options such as money market funds—which are currently providing a lot of members with negative net returns these days—or balanced funds. Yet it is surprising how many of these pre-packaged, easy-to-use solutions remain quite conservative and basic in how they are constructed.