Nearly three out of four workplace retirement plan investors who used target-date funds say they feel more secure about reaching their retirement goals and managing their portfolios than those who did not, according to a new survey released Tuesday by ING U.S.
When asked about various features available in target-date funds, all respondents showed a strong preference for funds that were managed by multiple investment managers and that were able to provide a guaranteed income stream at retirement.
An estimated 93% of target-date investors and nearly 71% of those who did not use them would want a target-date fund that provided stronger protection against market losses in the years leading up to and including retirement. Additionally, eight in 10 respondents using target-date funds and two-thirds of those not using them would prefer less market risk at that stage of the investment cycle.
Target-date assets have grown from $15 billion in 2002 to $363 billion in 2011, according to Chicago-based Morningstar Research.
"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.
Commissioned by ING Investment Management U.S. and the ING Retirement Research Institute, the study culled its findings from an online survey conducted by market research group Synovate on September 19 and 20. The respondents were 540 active defined contribution plan participants (212 invested in target-date funds and 328 who were not), between the ages of 25 and 69 years old, who were the primary/joint financial decision makers for their accounts. The data was weighted by household income and gender to make the results representative of the U.S. population.
Other key findings in the study include the following:
Almost nine in 10 (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 with a smaller number (71%) of those who did not use target-date funds.
More than six in 10 (61%) of target-date investors preferred multi-manager strategies while a much smaller number (14%) preferred a single manager.--Jim McConville