Defined contribution plan participants who invest in target-date funds have more confidence in meeting their retirement goals than other plan participants, according to a new survey by ING Investment Management U.S. and the ING Retirement Research Institute.
The survey of 540 participants found that 53% of target-date fund investors said they were confident they could meet retirement goals. By contrast, the confidence percentage was 39% among “active non-users,” participants who have access to target-date funds but don't use them. The confidence percentage was 40% among “passive non-users,” those who don't have access — or don't know if they have access — to such funds, the survey said.
Among target-date investors, 68% said they are comfortable deciding how much to invest in each investment option in their plan, compared to 65% for active non-users and 52% for passive non-users.
"These findings suggest that diversified, age-adjusted target date funds, when effectively designed, may work better than traditional offerings in bridging the gap between investor knowledge and long-term retirement objectives," Paul Zemsky, chief investment officer of multiasset strategies for ING Investment Management, said in a news release issued Tuesday. ING offers a target-fund series called ING Solutions.
The survey also demonstrated that sponsors and providers must offer more education about the role of target-date funds, even to those participants who investment in them. For example, the survey found that only 55% of target-date fund investors knew that asset allocations become more conservative over time and only 36% could describe a glidepath.