ING Study: Target Date Fund Investors More Confident about Reaching their Retirement Goals
A new study1 from ING U.S. found that workplace retirement plan investors who used target date funds felt more secure about reaching their retirement goals and managing their portfolios than those who did not. Nearly three-quarters (71%) of target date investors indicated that target date funds made them feel more confident that they were making sound investment decisions.
Target date funds provide investors with automatic asset allocation over time through the convenience of a single age- and risk-appropriate investment. With a simplified approach to investing, target date funds have become increasingly popular among employers that sponsor retirement plans and their participants. Industry data shows that target date assets have grown from $15 billion in 2002 to $363 billion in 2011.2
When asked about various features available in target date funds, all respondents showed a strong preference for those that are managed by multiple investment managers and are able to provide a guaranteed income stream at retirement. More than nine-in-ten (93%) of target date investors and nearly three-quarters (71%) of those who did not use them would want a target date fund that provides stronger protection against market losses in the years leading up to and including retirement. Additionally, eight-in-ten (80%) of respondents using targets date funds and two-thirds (66%) of those not using them would prefer less market risk at that stage of the investment cycle.
“These findings suggest that diversified, age-adjusted target date funds, when effectively designed, may work better than traditional offerings in bridging the gap between investor knowledge and long-term retirement objectives,” said Paul Zemsky, Chief Investment Officer of Multi-Asset Strategies for ING Investment Management.
“Like many of the latest 401(k) features, target date funds have evolved as a way to make saving for retirement easier and more automatic for the average plan investor,” added Rick Mason, president of Corporate Markets, ING U.S. Retirement. “Today, these funds are being designed into the newest breed of guaranteed income solutions, like ING’s new Lifetime Income Protection Program3, which can help investors turn their retirement dollars into an income stream that won’t run out.”
Other key findings of the study include the following:
- Nearly nine-in-ten (88%) of target date investors had interest in a target date fund that offers guaranteed income at retirement.
- Almost the same amount (86%) of target date investors felt confident they knew the definition of “diversification” compared to a smaller number (71%) of those who did not use target date funds.
- More than six-in-ten (61%) of target date investors preferred multi-manager strategies while a much smaller number (14%) preferred a single-manager.
As a leader in helping Americans better prepare for their financial future, ING believes that research into the expectations, perceptions and behaviors of investors can help create programs that drive positive retirement outcomes.
To view a report containing detailed findings of this study, please visit the ING Retirement Research Institute.
1. Findings are from an online survey conducted by Synovate, a leading global market research company, during the period of September 19-20, 2011. Respondents were 540 active defined contribution plan participants (212 invested in target date funds while 328 did not) between the ages of 25 and 69 and were the primary/joint financial decision maker for their account. Data was weighted by household income and gender to make the results representative of the U.S. population of retirement plan participants.
2. According to Morningstar and Financial Research Corporation, 2011.
3. The ING Lifetime Income Protection Program provides various target date asset allocation models or “portfolios.” Each portfolio allocates amounts between target date collective trust funds (the “Funds”) and multiple group variable annuity contracts (“Contracts”) that offer guaranteed income for life during retirement through a Minimum Guaranteed Withdrawal Benefit A portfolio is not an investment separate from its allocation between the Funds and Contracts, is not an investment company and has not been registered with the Securities and Exchange Commission under the Investment Company Act of 1940 or the Securities Act of 1933.
Plan administrative services provided by ING Life Insurance and Annuity Company (“ILIAC”) or ING Institutional Plan Services, LLC (“IPS”). Securities distributed by ING Financial Advisers, LLC (“IFA”) (member SIPC) or other broker-dealers or selling firms with which it has a selling agreement. ILIAC, IPS and IFA are members of the ING family of companies. May not be available in all states.
ING U.S. constitutes the U.S.-based retirement, insurance and investment management operations of Dutch-based ING Groep N.V. In the U.S., the ING (NYSE: ING) family of companies offers a comprehensive array of financial services to retail and institutional clients, which includes retirement plans, life insurance, mutual funds, managed accounts, alternative investments, institutional investment management, annuities, employee benefits and financial planning. ING holds top-tier rankings in key U.S. markets and serves approximately 15 million customers across the nation. For more information, visit http://ing.us.