Big Data Download

What target-date fund investors are doing wrong

Target-date fund mistakes

Now watching

Next video starts in : 7 Play

Target-date fund mistakes

Target-date fund mistakes
Replay video
Up next

It's back to basics for babies

It's back to basics for babies Up next

It's back to basics for babies

Target-date funds may seem simple enough: Retirement savers can take a set-it-and-forget-it approach with them, determining how much of their salaries to contribute and letting a fund manager adjust asset allocations over time based on a target retirement date.

But a majority of savers with money in target-date funds aren't using them correctly, according to Financial Engines, a firm that sifted through data on more than 700,000 workers with about $55 billion saved in 401(k) retirement plans.

RELATED: Social Security may not be as simple as it seems

"The idea is, you put all your money in one fund and you get a diversified 401(k) account. What we've seen though is a lot of folks start off on the right foot, and ultimately sort of spread their money out over time and as a result of that, see lower returns," said Financial Engines CEO Jeffrey Maggioncalda.

Savers should have at least 95 percent of their money in a target date fund, if they elect to invest in one at all, but fewer than 17 percent of people with money invested in them are adhering to this rule, Financial Engines found.

RELATED: More CFOs at top firms feel comfortable enough to retire

Target-date funds are intended to be used exclusively since they inherently control for risk and provide good diversification, according to the firm.

Those savers who are partially invested in target date funds only put 35 percent of their savings into those funds, Financial Engines found.

-- Comments, Questions, Suggestions? Tweet Us @BigDataDownload

Rates

View Comments (0)