Making age a factor in choosing QDIA options
Abstract: Target date funds (TDFs), the most popular 401(k) qualified default investment alternative, were designed to meet the investment needs of typical plan participants, no matter what their age. The theory is that employees can essentially “set it and forget it,” as TDF portfolios are automatically adjusted from aggressive to more conservative as employees approach and proceed through retirement. That theory, however, has been challenged by research pointing to participants’ failure to use TDFs as intended. This article examines why this is, and what employee benefit plans can do about it.