As target date funds become mainstream investment vehicles for defined-contribution plans, users are more confident than non-users that they will reach their retirement goals, according to a new study.
TDF users feel greater comfort with investment decision making, and exhibit other markers of investment success, Voya Investment Management said Tuesday in announcing the results of its third survey of participant preferences in these products.
Voya said the results pointed to several opportunities for plan sponsors to improve participation rates and potentially bolster outcomes for retirement savers.
The poll, conducted in September, comprised 1,005 respondents age 25 and older, all of whom were currently contributing to an employer-sponsored retirement plan and were a primary/joint financial decision maker for their account. Half used TDFs, and half did not.
Sixty-three percent of TDF users in the survey said they were confident that they would reach their retirement goals, up from 53% in the 2011 survey, while only 48% of non-users expressed similar confidence, up from 39%.
More than three-quarters said use of TDFs alleviated the stress of retirement planning and increased their confidence in their investment decisions.
The poll found that greater confidence led TDF users to make higher contributions to their accounts than non-users — a median of 8% of income versus a median of 6%.
This greater degree of confidence extended to outcomes as well: 67% of users said they had a plan to turn their savings into an income stream at retirement, compared with 46% of non-users.
Voya said acceptance of target date funds has steadily progressed as more participants have come to understand their benefits, convenience and features.
The survey results indicated strong interest in auto-features. Seventy-six percent of TDF users said auto-enrollment into the employer’s retirement plan would be helpful for many employees, and 72% said automatic increases of contributions would be helpful.