Vanguard sees rapid growth in target date fund adoption. Are participants prepared?

Vanguard recently released research highlighting the rapid growth in the adoption of target date funds in plans.

“The percentage of Vanguard defined contribution (DC) plans offering target-date funds increased from 13% of plans in 2004 to 75% in 2009. Target-date funds are rapidly replacing risk-based life-cycle funds in plan investment menus and are the predominant choice for plans offering a qualified default investment alternative (QDIA). As this increased use reshapes investment patterns, a new research note from Vanguard Center for Retirement Research explores what this trend can mean for plans and participants.”

View the PDF, Target Date Fund Adoption in 2009

This research analyzed 3.2 million participants in 2,200 defined contribution plans administered by Vanguard. Of all plans at Vanguard that have designated a QDIA, 80% use target date funds. In addition, 21% of these plans have adopted automatic enrollment – four times the amount of plans since 2005 - and nine in 10 plans with automatic enrollment are using target date funds as a QDIA.

With such rapid growth, how are participants properly educated about target date funds? Retirement projections for target date fund investments have traditionally been generic, inaccurate or completely unavailable.

PlanOutcome addresses this by providing participants with personalized retirement projections that account for target date fund glide paths and alternative savings strategies. As the target-date market explodes and companies like Vanguard harvest so many default participants and assets it seems only reasonable that those participants get some understanding of what retirement outcomes look like with the real target-date strategy used for projections.

View the PDF, Target Date Fund Adoption in 2009 »
PlanOutcome can help educate your participants about target date funds »