The problem with target date funds

Ary Rosenbaum

Ary Rosenbaum - The Rosenbaum Law Firm P.C.

I wasn’t a fan of target-date funds when the markets crashed in 2008 because there was no consistency of investment objectives and equity-fixed income mix between target-date funds for a specific year among different fund companies.

People who thought a 2010 or 2015 fund would have more fixed-income investments were in for a big of a shock based on the fund they were in. Funds also had different glide paths. It’s like buying diet sodas where some had a lot more calories than zero and there wasn’t any regulation that had labeling requirements where a 2025 target-date fund had a consistent equity-fixed income split among the fund companies.

Also, I have concerns over investment education because I’m sure there are countless participants out there that invest in target-date funds, as well as other funds in their investment selections, which defeats the purpose of the target date funds. Also, I’ve seen a major uptick in litigation against larger plans over proprietary target-date funds. With asset allocation funds and managed accounts available, I don’t know if target-date funds offer any type of value to both plan fiduciaries and plan participants.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ary Rosenbaum, The Rosenbaum Law Firm P.C. | Attorney Advertising

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Ary Rosenbaum

The Rosenbaum Law Firm P.C. on:

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