Participant-directed defined contribution plans now account for $9.7 trillion of the approximately $16.5 trillion in total pension assets, new research shows.
Principal Financial unveils this finding in “A 360-Degree Approach to Preparing for Retirement.” Drafted in collaboration with CREATE-Research, the report examines the innovations, gaps and trends within the U.S. retirement system.
The research reveals that target-date funds — mutual funds that automatically reset the asset mix (stocks, bonds, cash equivalents) in its portfolio according to a selected time frame appropriate for an investor — held $500 billion of assets in 2012, a figure that is “likely” to grow at a compounded annual growth rate (CAGR) of 15 percent.
The report points to “constraints” that are preventing plan participants from preparing adequately for retirement. Among those identified by advisors are:
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• Participants not saving enough (74 percent)
• Participants not starting to save early enough (70 percent)
• Participants living beyond their means (69 percent)
• Participants over-estimating their ability to plan ahead (66 percent)
• Participants putting off creating a financial plan (62 percent).
More than two in five plan participants polled expect new or better features to be embodied in target-date/life-cycle funds during the accumulation phase of retirement. These include:
• A clear income benchmark during the retirement phase (66 percent)
• Dynamic asset allocation (64 percent)