Target-date funds in 401(k) retirement plans - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Target-date funds in 401(k) retirement plans write by Olivia S. Mitchell. This book was released on 2012. Target-date funds in 401(k) retirement plans available in PDF, EPUB and Kindle. Individual responsibility for portfolio construction is a central theme for defined contribution pensions, yet the rise of target-date funds is shifting investment decisions from workers back to employers. A complex choice architecture including automatic enrollment, reenrollment, and fund mapping, is increasing the number of participants defaulting into employer-selected target-date funds. At the same time, portfolios of non-defaulted participants undergo sizeable changes, with equity share ratios widening by over 40 percent points between younger/older participants. Among active decision-makers, these funds act as a form of implicit employer-provided lifecycle investment advice. More broadly, our findings highlight malleable preferences among retirement investors and a demand for default-based guidance or simplified advice for households facing complex choices.
Target Date Funds and Portfolio Choice in 401(k) Plans
Target Date Funds and Portfolio Choice in 401(k) Plans - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Target Date Funds and Portfolio Choice in 401(k) Plans write by Olivia S. Mitchell. This book was released on 2020. Target Date Funds and Portfolio Choice in 401(k) Plans available in PDF, EPUB and Kindle. Target date funds in corporate retirement plans grew from $5B in 2000 to $734B in 2018, partly because federal regulation sanctioned these as default investments in automatic enrollment plans. We show that adopters delegated pension investment decisions to fund managers selected by plan sponsors. Including these funds in retirement saving menus raised equity shares, boosted bond exposures, curtailed cash/company stock holdings, and reduced idiosyncratic risk. The adoption of low-cost target date funds may enhance retirement wealth by as much as 50 percent over a 30-year horizon.
Use of Target-Date Funds in 401(k) Plans, 2007
Use of Target-Date Funds in 401(k) Plans, 2007 - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Use of Target-Date Funds in 401(k) Plans, 2007 write by Craig Copeland. This book was released on 2009. Use of Target-Date Funds in 401(k) Plans, 2007 available in PDF, EPUB and Kindle. Target-date funds (also called quot;life-cycle fundsquot;) are a type of mutual fund that automatically rebalances its asset allocation following a predetermined pattern over time. They typically rebalance to more conservative and income-producing assets as the participant's target date of retirement approaches. Of the 401(k) plan participants in the EBRI/ICI 401(k) database who were found to be in plans that offered target-date funds, 37 percent had at least some fraction of their account in target-date funds in 2007. Target-date funds held about 7 percent of total assets in 401(k) plans and the use of these funds is expected to increase in the future. The Pension Protection Act of 2006 made it easier for plan sponsors to automatically enroll new workers in a 401(k) plan, and target-date funds were one of the types of approved funds specified for a quot;defaultquot; investment if the participant does not elect a choice.This paper investigates the percentage of participants investing in target-date funds in 2007 across various demographic characteristics. Furthermore, it determines whether the entire account balance is allocated to target-date funds for those who invest in them. To control for the potential differences that are likely to result from those defaulted into the funds by automatic enrollment versus those actively choosing the funds, those who can be proxied as being auto-enrolled are compared with those who are not proxied as being auto-enrolled. Moreover, equity allocations outside of the target-date funds are studied both at the aggregate level of the target-date year and at the individual target-date fund level. Overall asset allocation to equities is also investigated, by comparing the equity for those who did not use target dates, those who have only some of their assets in target-date funds, and those who have all of their assets in target-date funds.
Default Nation
Default Nation - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Default Nation write by United States. Congress. Senate. Special Committee on Aging. This book was released on 2010. Default Nation available in PDF, EPUB and Kindle.
Making Investment Choices as Simple as Possible
Making Investment Choices as Simple as Possible - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Making Investment Choices as Simple as Possible write by Zvi Bodie. This book was released on 2008. Making Investment Choices as Simple as Possible available in PDF, EPUB and Kindle. Many participants in self-directed retirement plans (401k, IRA, etc.) do not know enough about investing to choose rationally among alternatives. Others may know enough, but find it unpleasant or too time-consuming. Target-date funds (TDFs), also known as life-cycle funds, are being offered as a simple solution to their dilemma. A TDF is a quot;fund of fundsquot; diversified across stocks, bonds, and cash with the feature that the proportion invested in stocks is automatically reduced as time passes. Empirical evidence suggests that a simple TDF strategy would be an improvement over the choices currently made by many uninformed plan participants. This paper explores one way to achieve an even greater improvement. Using a compact continuous-time optimization model, we characterize a person for whom a TDF strategy would be optimal: a quot;natural TDF holder.quot; We then show that the TDF strategy may be far from optimal for people who ő although of the same age ő differ from the natural TDF holder in their risk aversion or exposure to human-capital risk. To bring such plan participants much closer to their optimal strategy it is enough to add a second simple investment alternative ő a safe fund matched to their time horizon. Participants with the same time horizon could then choose (or be advised to choose) either the TDF or the safe target-date fund depending on their risk aversion and human-capital risk. We find that people who are very risk averse and who have a high exposure to market risk through their labor income would experience a substantial gain in welfare from being offered a safe target-date fund rather than a risky one. Recent empirical research suggests that human-capital betas change over one's working career. They are typically quite high during the early years when human capital represents the largest part of total wealth for most people, and they decline with age. To reflect gradual changes in human capital risk over the life-cycle from predominantly quot;stock-likequot; to mostly quot;bond-like,quot; TDFs should switch from a quot;linearquot; strategy to a quot;hump-shapedquot; strategy with respect to age.
