It appears CAP investors are keen for target date funds (TDFs). According to Vanguard’s Target-Date Fund Adoption in 2011 report, nearly one in four 401(k) plan participants invest solely in TDFs—marking a six-fold increase over the past five years.
With a standard planning tool, we can plug in RRSP savings of a million dollars and an assumed investment return of 5% a year and determine that we can generate an income of about $76,800 per year, including government benefits, indexed to 2% inflation, and our money will run out in about 20 years.
What does the “new world order” mean for individual investors? Colin Ripsman, vice-president with Phillips, Hager & North, delved into that question at the firm’s trustee education seminar last week in Toronto.
DC plan members who use target date funds as part of their investment strategy feel more secure about reaching their retirement goals, according to a study by ING U.S.
Sponsors of DC and other capital accumulation plans have long struggled to persuade their employees to take full advantage of corporate savings programs and play a more active role in their own retirement readiness.
With the erosion of assets in many retirement portfolios in recent years, plan sponsors are starting to wonder if members might never be able to retire.
A well-structured DC plan helps members to build savings during their working (accumulation) years and generate sufficient income for their retirement (de-accumulation) years. For plan sponsors, the challenge lies in structuring investment offerings that support members well through both the accumulation and de-accumulation phases.
Watch this video If your DC plan members are after simplicity, a target date fund may seem like a good choice. After all, the member gets a diversified portfolio that adjusts over time, without the member having to take any action. But not so fast, warns Michelle Peshko, senior advisor, pensions and investments, with Xstrata. […]
While plan sponsors across the country are retreating from DB arrangements that are costly to the bottom line in good times—and even more so in economic downturns such as those we’ve faced over the past decade—more and more are looking to DC as an alternative retirement savings option for their employees. According to the 2011 […]
My previous article, Finding the target (date fund), introduced target date funds (TDFs)—also known as lifecycle or age-based funds—and provided background for why they are becoming an increasingly popular choice for capital accumulation plan (CAP) sponsors and their plan members. TDF usage by members will often be very high, and plan sponsors should ensure that […]