When we get on a plane, we trust that the pilot is trained, rested, and savvy about the upcoming trip. We trust the plane and crew will get us to where we want to go, and in reasonably good shape.

It’s no different with “target date” mutual funds, which are designed to get investors to their target retirement date with their accounts intact. We trust that the fund managers know what they are doing and will get us to our destination date in reasonably good financial shape.

But income planning customers need to know more than that about these funds.

Namely they need to know, and to be reminded, that target-date funds are mutual funds, so retirement goals and performance are not guaranteed.

They should also know, and be reminded, that most such funds declare their objectives to include prudent money management and a gradual beefing up of conservative investments as time passes.

It may also help for them to know that these funds’ actual investment approaches vary considerably. That is the gist of 2 news reports, both reported out in May 2008, which appear in this month’s issue of Income Planning. Brief summaries follow:

In Watson Wyatt study says some target-date funds miss their target, we find that, in 2006, stock allocations in funds aimed at employees about 10 years from retirement varied from 40% to 80%, according to Watson Wyatt Worldwide, Washington. Also, allocations in target-date funds aimed at employees who were about to retire ranged from 20% to 65%, the consultants said.

In Target-date holdings vary, FRC finds, we learn that, among 58 funds designed for workers planning to retire in 2020, the amount of holdings invested in stock, stock funds and related instruments varies from 51% to 95%, according to Financial Research Corp., Boston.

In short, these funds have variable allocation approaches. Planning for and advising retirement income clients should include that reality.

Granted, the wide variance in allocation may amount to no more than the proverbial hill of beans by time the retirement date comes. After all, like a pilot, the money manager may make various adjustments along the way, based on market conditions and other factors, but the manager may still (and probably is likely to) get to the intended destination safe and sound. For instance, it could work out that one target 2020 fund may currently be invested 70% in equities while another is only 55% in equities, but both still may achieve very acceptable, and similar, performance results by time the year 2020 arrives.

Then again, the variableness of the strategies could end up being the very factor that accounts for one fund tanking by the target date while the other soars

The problem is, the income planner, and the client, has no more idea about which target date plan will do what by year 2020 than they know which equity or bond fund will do what by that same year. They can make hunches and good guesses, based on the makeup of the funds, the objectives, the managers, the investment styles, and the actual performance that occurs as the years go by, but they can’t bank on those hunches and guesses.

Again, the products are securities, not guaranteed products like fixed annuities, bank savings accounts or bank certificates of deposit.

A quick review of the target date sales literature shows that the fund companies have done their part to bring this message forward. These materials repeatedly state that the performance is not guaranteed, that the products are investments subject to economic conditions, and “you many lose money.”

So, there you have it: the 401(k) world looks so tame right now, but its future looks to be anything but. And this is so for income advisors who work with DC plans as well as for those who work with individual clients.

Income planners who reinforce the “not guaranteed” message, and plan with that uncertainty on the table, will do the customer a world of good. This is far more realistic than hoping the customer remembers the performance is variable and trusting that the target date fund will achieve certain growth expectations the customer may have developed through by-guess and by-golly thinking.