Ready! Fire! Aim? 2018
12/11/2018
The strongest plans should be designed for the edges as well as the middle.
More than a decade of research on retirement plan participant behavior continues to highlight important trends and implications for target date fund design.
Contribution rates: Automatic enrollment lags behind Retirement

Unintended consequences of automatic enrollment
Automatically enrolled participants on average contribute 3%—unless an action is taken—far from the recommended 10% or more.

The salary effect
We saw distinct behaviors and patterns for high ($85K+), middle ($40k-$85K) and low earners (<$40K).

Withdrawal trends
For most participants, spending often increases around the point of retirement; many exit their plan soon thereafter.

Evaluating target date fund design
The core of our research focused on the type of target date fund design most likely to position the most participants for safer levels of retirement funding.
About our research
A quantitative examination of actual saving and spending patterns drawn from more than 4,000 defined contribution plans with approximately 2 million participants.
TARGET DATE FUNDS. Target date funds are funds with the target date being the approximate date when investors plan to start withdrawing their money. Generally, the asset allocation of each fund will change on an annual basis with the asset allocation becoming more conservative as the fund nears the target retirement date. The principal value of the fund(s) is not guaranteed at any time, including at the target date.
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