Employers should look carefully at mutual funds designed for retirement plan participants who are set to retire in a specific year.
In theory, managers of “target date” funds are supposed to shift toward more conservative asset allocations as participants get closer to their anticipated retirement dates, but some of the managers seem to keep high percentages of stock in the portfolios even when participants are getting ready to retire, according to retirement plan consultants at Watson Wyatt Worldwide, Washington.
Traditionally, the rule of thumb has been that investors could decide what percentage of their assets to invest in stock by subtracting their age from 100.