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Plan participants with managed allocations experience better age-based equity allocations, and those utilizing advice have higher engagement and saving rates, per new Vanguard research, How Americans Use Professionally Managed Allocations.
Target-date investments and advice services lead to a more disciplined approach to portfolio risk-taking, with risk levels falling as investors grow older. They also help remedy the problem of extreme allocations found among many DC plan participants who, without professionally managed allocations, construct their own portfolios. For these reasons, the rise in adoption of managed allocations is likely to continue in the coming years.
Data for this research comes from How America Saves 2023—an examination of retirement plan data of nearly 5 million DC plan participants across Vanguard's recordkeeping business. Expected this June, the full report will include additional data and insights intended to help DC plan sponsors optimize plan design.
How Americans Use Professionally Managed Allocations examines that data, focusing on how the shift in responsibility for investment decision-making away from the participant and toward employer-selected investment and advice programs is improving portfolio construction and leading to more disciplined participant investment behavior.
Note:
- All investing is subject to risk, including the possible loss of the money you invest.
- 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 work force. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in target date funds is not guaranteed at any time, including on or after the target date.
- Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.