3/23/09 – San Diego, 4:30 pm PDT: Could have done better with the session’s title, but the content was spot on. Will the market we’re experiencing bring a sea change in how employees accumulate wealth for retirement? This was the question the panelists attempted to answer. But really it was more about an examination of target date funds and how they got it so wrong.
401(k)s are heavily involved with target date funds because they answer so many of the asset allocation needs required by participants, or so we thought. Take a look at 2010 funds, billed as relatively safe. They’re off by 27 percent in the past year. Tough to make back if retirement was the plan. As one panelist said, “Clearly, there are some accumulation issues that need to be dealt with, as well as distribution issues. [Target date funds ] are great chassis, but they need to be tweaked.” Clearly …
Highlights of the session include:
o It’s not about which product is right, but rather how a particular product is used in the plan. There’s no perfect product (obviously), so it must be built into the plan’s path to retirement, rather than something that will make the client rich at a defined period of time to be used as retirement income (the process, rather than product, argument).