Target date funds are receiving attention from the SEC, the DOL and Congress.
The increased scrutiny is a result of the way that target date funds have performed during the market meltdown over the past year.
As reported recently, in theory target date funds are supposed to provide a smooth and somewhat automated transition from more risky assets to less risky assets as people approach retirement.
One of the problems is that the actual asset allocations for people approaching retirement varies widely among funds with similar objectives. This is a problem because people approaching or at retirement can be exposed to a level of market risk or volatility that is completely inappropriate for their stage of life and risk tolerance.
Market risk is not as much of a concern for younger investors, but for those at or approaching retirement the blow-ups in certain target date funds has exposed them to sequence of returns risk and the possibility of having significantly less income during their retirement years.
Source: SmartMoney
- Log in to post comments
