LIMRA: just 1 in 6 consumers familiar with target-date funds

By Warren S. Hersch

November 14, 2012 at 09:56 AM

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Only one in six consumers are familiar with target-date investment funds, according to a new report.

LIMRA published this finding in a summary of results from a survey of 3,531 consumers, ages 18 to 84, conducted in May 2012. The respondents were involved in household financial decision-making, worked for pay, were retired or recently unemployed, and randomly assigned to answer questions on TDFs.

The LIMRA survey found that only 16 percent of consumers said they were familiar with TDFs.

The survey also found that fewer women were likely to say they were familiar with TDFs as men (10 percent vs. 22 percent). Consumers under age 50 and those with household incomes of $100,000 or more were the most likely to be familiar with TDFs (20 percent and 30 percent, respectively).

While more than half of consumers understood that TDFs become more conservative over time and provide a diversified mix of stocks and bonds, only one in 10 consumers believed that TDFs included guarantees, become risk free at retirement or require income to be drawn at the target year–none of which are typical features of TDFs, the survey found.

Though IRA owners in general were more likely to claim to be familiar with TDFs than defined contribution (DC) plan participants (42 percent vs. 37 percent), their actual knowledge is similar to that of DC participants.

LIMRA found also that consumers who have invested in TDFs are far more confident than those who don't own TDFs that they will be able to live the retirement life style they want (62 percent vs. 37 percent). However, three quarters of TDF owners report being somewhat or very knowledgeable about investments or financial products, compared to just 42 percent of non-owners.

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