Target-date funds in 401(k) retirement plans PDF Download

Author: Olivia S. Mitchell
Publisher:
ISBN:
Category : 401(k) plans
Languages : en
Pages : 34

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Book Description
Individual responsibility for portfolio construction is a central theme for defined contribution pensions, yet the rise of target-date funds is shifting investment decisions from workers back to employers. A complex choice architecture including automatic enrollment, reenrollment, and fund mapping, is increasing the number of participants defaulting into employer-selected target-date funds. At the same time, portfolios of non-defaulted participants undergo sizeable changes, with equity share ratios widening by over 40 percent points between younger/older participants. Among active decision-makers, these funds act as a form of implicit employer-provided lifecycle investment advice. More broadly, our findings highlight malleable preferences among retirement investors and a demand for default-based guidance or simplified advice for households facing complex choices.

Author: Olivia S. Mitchell
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Book Description
Target date funds in corporate retirement plans grew from $5B in 2000 to $734B in 2018, partly because federal regulation sanctioned these as default investments in automatic enrollment plans. We show that adopters delegated pension investment decisions to fund managers selected by plan sponsors. Including these funds in retirement saving menus raised equity shares, boosted bond exposures, curtailed cash/company stock holdings, and reduced idiosyncratic risk. The adoption of low-cost target date funds may enhance retirement wealth by as much as 50 percent over a 30-year horizon.

Author: Craig Copeland
Publisher:
ISBN:
Category :
Languages : en
Pages : 32

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Book Description
Target-date funds (also called quot;life-cycle fundsquot;) are a type of mutual fund that automatically rebalances its asset allocation following a predetermined pattern over time. They typically rebalance to more conservative and income-producing assets as the participant's target date of retirement approaches. Of the 401(k) plan participants in the EBRI/ICI 401(k) database who were found to be in plans that offered target-date funds, 37 percent had at least some fraction of their account in target-date funds in 2007. Target-date funds held about 7 percent of total assets in 401(k) plans and the use of these funds is expected to increase in the future. The Pension Protection Act of 2006 made it easier for plan sponsors to automatically enroll new workers in a 401(k) plan, and target-date funds were one of the types of approved funds specified for a quot;defaultquot; investment if the participant does not elect a choice.This paper investigates the percentage of participants investing in target-date funds in 2007 across various demographic characteristics. Furthermore, it determines whether the entire account balance is allocated to target-date funds for those who invest in them. To control for the potential differences that are likely to result from those defaulted into the funds by automatic enrollment versus those actively choosing the funds, those who can be proxied as being auto-enrolled are compared with those who are not proxied as being auto-enrolled. Moreover, equity allocations outside of the target-date funds are studied both at the aggregate level of the target-date year and at the individual target-date fund level. Overall asset allocation to equities is also investigated, by comparing the equity for those who did not use target dates, those who have only some of their assets in target-date funds, and those who have all of their assets in target-date funds.

Author: Stacy L. Schaus
Publisher: John Wiley & Sons
ISBN: 0470632887
Category : Business & Economics
Languages : en
Pages : 278

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Book Description
The ultimate guidebook for navigating the new world of pensions and retirement plans In the wake of the explosive growth of defined contribution (DC) plans invested with target date strategies, and the understanding of how important these strategies can be in effectively meeting retirement income goals, plan sponsors are seeking more optimal target date approaches. This timely book provides you with in-depth answers from the nation's most qualified and experienced experts to pressing questions about DC plan design. Presents the views of individuals from all across the market Includes a broad range of plan sponsors both in the corporate world and in the public/government sectors Offers views from consultants and advisors from the most respected firms, academics who teach at leading universities, and other innovative leaders With a broad range of knowledge and insight, Designing Successful Target Date Strategies in Defined Contribution Plans helps you understand the evolution of DC plans, pulls together all angles of what it takes to develop custom target date strategies, and provides you with a look ahead to the future.

Author: United States. Congress. Senate. Special Committee on Aging
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 136

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Book Description

Author: Zvi Bodie
Publisher:
ISBN:
Category :
Languages : en
Pages : 15

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Book Description
Many participants in self-directed retirement plans (401k, IRA, etc.) do not know enough about investing to choose rationally among alternatives. Others may know enough, but find it unpleasant or too time-consuming. Target-date funds (TDFs), also known as life-cycle funds, are being offered as a simple solution to their dilemma. A TDF is a quot;fund of fundsquot; diversified across stocks, bonds, and cash with the feature that the proportion invested in stocks is automatically reduced as time passes. Empirical evidence suggests that a simple TDF strategy would be an improvement over the choices currently made by many uninformed plan participants. This paper explores one way to achieve an even greater improvement. Using a compact continuous-time optimization model, we characterize a person for whom a TDF strategy would be optimal: a quot;natural TDF holder.quot; We then show that the TDF strategy may be far from optimal for people who ő although of the same age ő differ from the natural TDF holder in their risk aversion or exposure to human-capital risk. To bring such plan participants much closer to their optimal strategy it is enough to add a second simple investment alternative ő a safe fund matched to their time horizon. Participants with the same time horizon could then choose (or be advised to choose) either the TDF or the safe target-date fund depending on their risk aversion and human-capital risk. We find that people who are very risk averse and who have a high exposure to market risk through their labor income would experience a substantial gain in welfare from being offered a safe target-date fund rather than a risky one. Recent empirical research suggests that human-capital betas change over one's working career. They are typically quite high during the early years when human capital represents the largest part of total wealth for most people, and they decline with age. To reflect gradual changes in human capital risk over the life-cycle from predominantly quot;stock-likequot; to mostly quot;bond-like,quot; TDFs should switch from a quot;linearquot; strategy to a quot;hump-shapedquot; strategy with respect to age.

Author: Mark Anthony Grimaldi
Publisher: Page Publishing Inc
ISBN: 1644628902
Category : Business & Economics
Languages : en
Pages : 180

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Book Description
In his acclaimed first book, The Money Compass, practicing economist Mark Anthony Grimaldi enlightened his readers by showing them how their 401(k) plans benefited no one but Uncle Sam. In this follow-up, he dives deeper into the subject and proves once and for all that a 401(k) plan might be the single biggest hindrance to a secure Tax Free retirement. This accomplished economist will give you a guide on how you can improve your retirement with 3 simple steps. So if you would rather "spend" your retirement savings as opposed to "spend" your retirement savings paying taxes, buy this book and follow his 3 simple steps and RetireSMART!

Author: James M. Dahle
Publisher: White Coat Investor LLC the
ISBN: 9780991433100
Category : Business & Economics
Languages : en
Pages : 160

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Book Description
Written by a practicing emergency physician, The White Coat Investor is a high-yield manual that specifically deals with the financial issues facing medical students, residents, physicians, dentists, and similar high-income professionals. Doctors are highly-educated and extensively trained at making difficult diagnoses and performing life saving procedures. However, they receive little to no training in business, personal finance, investing, insurance, taxes, estate planning, and asset protection. This book fills in the gaps and will teach you to use your high income to escape from your student loans, provide for your family, build wealth, and stop getting ripped off by unscrupulous financial professionals. Straight talk and clear explanations allow the book to be easily digested by a novice to the subject matter yet the book also contains advanced concepts specific to physicians you won't find in other financial books. This book will teach you how to: Graduate from medical school with as little debt as possible Escape from student loans within two to five years of residency graduation Purchase the right types and amounts of insurance Decide when to buy a house and how much to spend on it Learn to invest in a sensible, low-cost and effective manner with or without the assistance of an advisor Avoid investments which are designed to be sold, not bought Select advisors who give great service and advice at a fair price Become a millionaire within five to ten years of residency graduation Use a "Backdoor Roth IRA" and "Stealth IRA" to boost your retirement funds and decrease your taxes Protect your hard-won assets from professional and personal lawsuits Avoid estate taxes, avoid probate, and ensure your children and your money go where you want when you die Minimize your tax burden, keeping more of your hard-earned money Decide between an employee job and an independent contractor job Choose between sole proprietorship, Limited Liability Company, S Corporation, and C Corporation Take a look at the first pages of the book by clicking on the Look Inside feature Praise For The White Coat Investor "Much of my financial planning practice is helping doctors to correct mistakes that reading this book would have avoided in the first place." - Allan S. Roth, MBA, CPA, CFP(R), Author of How a Second Grader Beats Wall Street "Jim Dahle has done a lot of thinking about the peculiar financial problems facing physicians, and you, lucky reader, are about to reap the bounty of both his experience and his research." - William J. Bernstein, MD, Author of The Investor's Manifesto and seven other investing books "This book should be in every career counselor's office and delivered with every medical degree." - Rick Van Ness, Author of Common Sense Investing "The White Coat Investor provides an expert consult for your finances. I now feel confident I can be a millionaire at 40 without feeling like a jerk." - Joe Jones, DO "Jim Dahle has done for physician financial illiteracy what penicillin did for neurosyphilis." - Dennis Bethel, MD "An excellent practical personal finance guide for physicians in training and in practice from a non biased source we can actually trust." - Greg E Wilde, M.D Scroll up, click the buy button, and get started today!

Author: Hugh W. Connelly
Publisher: Xlibris Corporation
ISBN: 1479768928
Category : Business & Economics
Languages : en
Pages : 107

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Book Description
Hugh W. Connelly is the managing member of Independent Retirement Advisers, LLC (“IR Advisers”), a NJ-based investment adviser. Hugh became very frustrated with the performance in his own 401K plan. He founded IR Advisers to help people better manage their 401K retirement plans. Hugh is a Chartered Financial Analyst (CFA). There are only about 100,000 CFAs in the world. He is also a Certified Fund Specialist (CFS). Hugh is an adjunct professor of fi nance at Strayer University in Philadelphia. Married with three children, Hugh is a British car enthusiast and an avid runner. He has completed over 24 marathons including the marathons in Philadelphia, New York, Boston, Reykjavik, Dublin, Rome and the Athens Marathon in Greece.

Author: Edwin J. Elton
Publisher:
ISBN:
Category :
Languages : en
Pages : 34

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Book Description
Research has shown that individual investors make poor asset allocation decisions in 401k plans. In response to this research, 72% of all 401k plans now offer Target Date Funds where asset allocation decisions are made for the investor and 43% of the assets of young 401(k) plan participants are invested in them. This paper is a comprehensive study of the characteristics and performance of these vehicles. We show that Target Date Funds are very active in there allocation decisions and this does not help the investors. Furthermore they hold many types of asset categories like commodities and sector funds not normally thought of as part of their portfolio. We find many of their asset allocation decisions satisfy fund family goals rather than investor goals. Finally a simple strategy of passively holding their initial allocation almost always produces higher Sharpe ratios than those of the target date funds.