Target date fund investors may be happy with their plans, but they don't seem to be using them properly, according to a new study by AllianceBernstein LP.
The study found that 76% of defined-contribution-plan participants who are using target date funds think these all-in-one investment options provide better performance than they could get if they selected individual mutual funds on their own.
Eighty-six percent of all target date fund users plan to maintain or increase their investment in such funds.
However, the same study found that only 19% percent of the more than 1,000 participants polled had put 80% to 100% of their assets in a target date fund — the way in which they are intended to be used. Sixty-percent of those investors don't want to put all of their assets in a single target date fund because they “don't want to put all of their eggs in one basket,” according to a release issued by AllianceBernstein.
“We believe that both the financial services industry and plan sponsors can use these findings to improve the investment solutions and communications programs offered through defined contribution plans — all with the goal of helping employees to be well-prepared for retirement,” said Cathy Peterson, senior marketing director in AllianceBernstein's defined-contribution-investments group.