Our vision for innovating the TDF landscape

January 28, 2021

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78 percent participants

Target-date funds (TDFs) have come a long way. In 2019, 78% of Vanguard participants invested in a target-date fund, and 54% of Vanguard participants held a single target-date fund.* However, data shows that as participants get older, they are less likely to use a target-date fund for their retirement needs. In fact, in 2018, 55.6% of the assets of participants in their 20s were in TDFs. This decreased to just over 20% of the assets of people in their 50s and 60s.**

A reasonable question for plan sponsors to ask is "What is the role of target-date funds for older workers?" Vanguard experts tackled this question in a recent virtual event. In the first video below, we share more on the possibility of offering funds with different equity landing points on the glide path and provide plan sponsors with best practices to support retired participants.

At the event, we also asked plan sponsors which TDF investment topics are of greatest interest to their plans. A majority said retirement income, but as the second video shows, there was also interest in the potential role of asset classes like environmental, social, and governance (ESG); private equity; and blending active and passive funds in TDFs.

* Source: How America Saves 2020.
** Source: EBRI Issue Brief on What Does Consistent Participation in 401(k) Plans Generate? Changes in 401(k) Account Balances, 2010–2018. October 1, 2020.

Video transcript: The future of TDFspdf

Video transcript: The evolving needs of target-date fund investorspdf


Notes:

  • Investments in target-date funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in the target-date fund is not guaranteed at any time, including on or after the target date.
  • All investing is subject to risk, including the possible loss of the money you invest.